Table of Contents

1. Introduction
2. Breaking Down the Financial Picture
3. The 4% Rule: How Much Can You Safely Withdraw?
4. Creating Your Monthly Income Strategy
5. The Realistic Monthly Budget Breakdown
6. Healthcare Costs Before Medicare at 65
7. Tax Considerations for Your Retirement Income
8. How Long Will $875K Last?
9. Adjustments for Different Scenarios
10. Tips to Make Your Money Last Longer
11. Frequently Asked Questions
12. Conclusion

Introduction

You've worked hard, saved diligently, and now you're considering retirement at age 64 with $875,000 in savings and $2,450 monthly in Social Security benefits. The question keeping you up at night: Is this enough? What will my monthly budget actually look like?

These are the exact questions thousands of Americans approaching retirement age are asking. According toFidelity Investments, the average 401(k) balance for workers aged 60-69 is approximately $182,100—meaning your $875,000 nest egg puts you significantly ahead of most Americans. But "ahead of most" doesn't automatically mean "enough for you."

Your retirement snapshot:

• Age: 64 (one year before Medicare eligibility)
• Retirement savings: $875,000
• Social Security benefit: $2,450/month
• Goal: Determine sustainable monthly spending

The reality of retirement budgeting involves careful calculation of sustainable withdrawal rates, tax implications, healthcare costs (especially that critical year before Medicare), and lifestyle expectations. This comprehensive analysis breaks down exactly what your monthly budget could look like, identifies potential challenges, and provides strategies to ensure your money lasts throughout a potentially 30+ year retirement.

Whether you're at exactly this financial position or simply curious about retirement math, this detailed breakdown will help you understand how retirement savings translate into actual spendable monthly income.

Breaking Down the Financial Picture

Your Assets and Income Sources

Let's clearly define what you're working with:

Retirement Savings: $875,000

This could be allocated across various accounts:

• Traditional 401(k)/IRA: Pre-tax savings, taxable upon withdrawal
• Roth IRA/401(k): After-tax savings, tax-free withdrawals
• Taxable brokerage: Invested savings, capital gains taxation
• Cash/savings: Emergency reserves

Optimal allocation assumption for this analysis:

• Traditional retirement accounts (401k/IRA): $700,000 (80%)
• Roth IRA: $100,000 (11%)
• Taxable investments: $50,000 (6%)
• Cash reserves: $25,000 (3%)

Social Security: $2,450/month ($29,400/year)

At 64, you're taking Social Security two years before your Full Retirement Age (FRA) of 66, assuming you were born between 1954-1956. This means your benefit is reduced approximately 13.3% from what you'd receive at FRA.

What you'd receive at different ages:

• Age 62: ~$1,960/month (30% reduction)
• Age 64 (current): $2,450/month (13.3% reduction)
• Age 66 (FRA): ~$2,825/month (full benefit)
• Age 70: ~$3,728/month (32% increase from FRA)

Important consideration: By claiming at 64 rather than 70, you're accepting approximately $1,278 less per month for life—a significant decision we'll address later.

Total Net Worth Position:

Asset	Value	Purpose
Traditional 401(k)/IRA	$700,000	Primary retirement income
Roth IRA	$100,000	Tax-free income, flexibility
Taxable investments	$50,000	Bridge income, emergencies
Cash reserves	$25,000	Immediate access emergency
Total	$875,000

Plus: $2,450 monthly Social Security = $29,400 annual guaranteed income

The 4% Rule: How Much Can You Safely Withdraw?

Understanding Sustainable Withdrawal Rates

The "4% rule" originated from the Trinity Study and suggests withdrawing 4% of your portfolio in year one, then adjusting for inflation annually, provides approximately 90%+ probability of your money lasting 30 years.

Applying the 4% rule to $875,000:

$875,000×0.04=$35,000 annual withdrawal\$875,000 \times 0.04 = \$35,000 \text{ annual withdrawal}$875,000×0.04=$35,000 annual withdrawal

Monthly withdrawal: $35,000 ÷ 12 = $2,917

Combined with Social Security:

• Portfolio withdrawal: $2,917/month
• Social Security: $2,450/month
• Total monthly income: $5,367

Before taxes. We'll calculate after-tax income shortly.

Should You Use 4% or Something Different?

The 4% rule has limitations:

Arguments for lower withdrawal (3-3.5%):

• Retiring at 64 means potentially 30-35 year retirement
• Current bond yields lower than historical averages
• Market valuations elevated
• Healthcare costs rising faster than inflation
• Longevity risk (living longer than expected)

Arguments for higher withdrawal (4.5-5%):

• Social Security provides stable base income
• Flexibility to reduce spending in down markets
• Pension or other income sources (if any)
• Willingness to adjust lifestyle

Conservative approach for this analysis: 3.75% withdrawal rate

$875,000×0.0375=$32,813 annual withdrawal\$875,000 \times 0.0375 = \$32,813 \text{ annual withdrawal}$875,000×0.0375=$32,813 annual withdrawal

Monthly withdrawal: $2,734

Combined monthly gross income: $2,734 + $2,450 = $5,184

This slightly lower withdrawal rate provides additional safety margin for a potentially long retirement starting at 64.

Creating Your Monthly Income Strategy

Optimizing Which Accounts to Draw From

The order of withdrawals significantly impacts how long your money lasts and your lifetime tax burden.

Recommended withdrawal sequence:

Year 1 (Age 64-65, pre-Medicare):

• Draw from taxable accounts first ($50,000 available)
• Supplement with Traditional IRA as needed
• Preserve Roth for later years
• Use cash reserves only for true emergencies

Why taxable first:

• Long-term capital gains taxed at 0-15% (favorable)
• Allows tax-deferred accounts to continue growing
• May have cost basis that reduces taxable gains

Years 2-10 (Ages 65-74):

• Continue drawing from Traditional IRA/401(k)
• Strategic Roth conversions if in low tax bracket
• Begin Roth withdrawals if needed for tax diversification

Years 10+ (Ages 75+):

• Required Minimum Distributions (RMDs) from Traditional accounts
• Roth accounts for tax-free supplemental income
• Flexibility to manage tax brackets

Monthly Income Calculation:

Gross monthly income:

• Social Security: $2,450
• Portfolio withdrawal: $2,734
• Total gross: $5,184

Tax estimation (covered in detail later):

• Federal taxes: ~$350/month
• State taxes: Varies by state ($0-$250/month)

Estimated net monthly income: $4,584-$4,834

This represents your actual spendable monthly income after taxes.

The Realistic Monthly Budget Breakdown

Creating a Sustainable Monthly Budget

Based on net monthly income of approximately $4,700 (splitting the difference on state tax assumptions), here's a realistic budget breakdown:

Housing (30% - $1,410)

Expense	Amount	Notes
Mortgage/Rent	$1,100	Or $0 if paid off
Property taxes	$250	Varies significantly by location
Homeowners insurance	$60	Annual ÷ 12
Total Housing	$1,410

If mortgage is paid off: This budget category drops dramatically, freeing up $1,100/month for other priorities. Many financial advisors recommend entering retirement mortgage-free.

Healthcare (15% - $705)

Expense	Amount	Notes
Health insurance premium	$550	ACA marketplace (pre-Medicare)
Prescription drugs	$75	Out-of-pocket costs
Dental/vision	$50	Not covered by basic plans
Medical copays/deductibles	$30	Monthly average
Total Healthcare	$705

Critical note: Healthcare costs drop significantly once Medicare begins at 65. Budget for higher costs in Year 1.

Food (12% - $564)

Expense	Amount	Notes
Groceries	$450	Two-person household
Dining out	$114	Modest restaurant spending
Total Food	$564

Transportation (10% - $470)

Expense	Amount	Notes
Car payment	$0	Ideally, own vehicles outright
Car insurance	$120	Two vehicles, good driving record
Gas	$150	Reduced commuting in retirement
Maintenance/repairs	$100	Monthly average
Registration/fees	$100	Annual costs ÷ 12
Total Transportation	$470

Utilities (8% - $376)

Expense	Amount	Notes
Electric/gas	$175	Varies by climate/home size
Water/sewer	$60
Internet	$65
Cell phones	$76	Two lines
Total Utilities	$376

Insurance (4% - $188)

Expense	Amount	Notes
Life insurance	$50	May reduce/eliminate in retirement
Umbrella policy	$25	Liability protection
Long-term care (optional)	$113	Highly recommended
Total Insurance	$188

Personal & Lifestyle (8% - $376)

Expense	Amount	Notes
Clothing	$75	Reduced professional wardrobe needs
Personal care	$75	Haircuts, toiletries
Entertainment	$150	Streaming, hobbies, activities
Gifts	$76	Birthdays, holidays
Total Personal	$376

Discretionary/Travel (8% - $376)

Expense	Amount	Notes
Travel fund	$250	Domestic trips, visiting family
Hobbies	$126	Golf, crafts, classes
Total Discretionary	$376

Emergency/Buffer (5% - $235)

Expense	Amount	Notes
Emergency fund contribution	$100	Maintaining reserves
Unexpected expenses	$135	Home repairs, car issues
Total Buffer	$235

Complete Monthly Budget Summary:

Category	Amount	Percentage
Housing	$1,410	30%
Healthcare	$705	15%
Food	$564	12%
Transportation	$470	10%
Utilities	$376	8%
Personal/Lifestyle	$376	8%
Discretionary/Travel	$376	8%
Emergency Buffer	$235	5%
Insurance	$188	4%
Total	$4,700	100%

This budget works—spending exactly matches available after-tax income of ~$4,700/month.

Healthcare Costs Before Medicare at 65

The Critical First Year Challenge

Retiring at 64 means one full year without Medicare eligibility—and this is often the most expensive healthcare year of early retirement.

Healthcare Options at Age 64:

Option 1: ACA Marketplace Insurance

Based on $62,000 annual income ($5,184/month gross):

• Premium estimate: $500-700/month for comprehensive coverage
• Deductible: $2,000-$5,000 typically
• Out-of-pocket maximum: $8,700

Subsidy consideration: At this income level, you may qualify for modest premium subsidies, reducing costs slightly.

Option 2: COBRA (If Recently Employed)

Continuing employer coverage:

• Premium: Often $1,500-2,500/month (employer no longer subsidizing)
• Coverage: Same as when employed
• Duration: Up to 18 months

Usually not recommended due to extreme cost, unless employer coverage is significantly better than marketplace options.

Option 3: Spouse's Employer Coverage

If spouse is still working:

• Continue on spouse's plan until Medicare eligibility
• Often most cost-effective option
• Dependent coverage typically cheaper than individual marketplace

Transition to Medicare at 65:

Medicare costs at 65:

• Part A (hospital): $0 premium for most
• Part B (medical): $185/month (2025 rate)
• Part D (prescription): $30-50/month
• Medigap supplemental: $150-250/month
• Total Medicare costs: $365-485/month

Savings vs. pre-Medicare: $220-340/month reduction in healthcare costs

This savings provides budget flexibility once you reach 65—consider redirecting to travel, hobbies, or additional savings.

Tax Considerations for Your Retirement Income

Understanding Your Tax Burden

Retirement income isn't tax-free. Here's how your income would be taxed:

Income Components:

Source	Amount	Tax Treatment
Social Security	$29,400/year	Partially taxable (up to 85%)
Traditional IRA withdrawal	$32,813/year	Fully taxable as ordinary income
Total gross income	$62,213/year

Social Security Taxation:

At $62,213 total income, approximately 85% of Social Security becomes taxable:

• Taxable Social Security: $29,400 × 0.85 = $24,990

Total Taxable Income:

• Taxable Social Security: $24,990
• Traditional IRA withdrawal: $32,813
• Total taxable income: $57,803

Federal Tax Calculation (2025 brackets, married filing jointly):

• Standard deduction: $30,000 (65+ deduction applies to one spouse)
• Taxable income after deduction: $57,803 - $30,000 = $27,803

Tax on $27,803:

• 10% on first $23,200: $2,320
• 12% on remaining $4,603: $552
• Total federal tax: $2,872/year ($239/month)

State Taxes:

Varies dramatically by state:

• No income tax states: FL, TX, NV, WY, WA, AK, SD, TN (on wages), NH (on wages)
• Low tax states: AZ, CO, NC (around 4-5%)
• High tax states: CA, NY, NJ, OR (6-10%+)

For moderate tax state (5%):

• State tax: $27,803 × 0.05 = $1,390/year ($116/month)

Total Tax Burden:

• Federal: $239/month
• State (est.): $116/month
• Total: $355/month

After-Tax Monthly Income:

• Gross: $5,184
• Taxes: $355
• Net: $4,829

This matches closely with our $4,700 budget assumption, leaving small buffer.

How Long Will $875K Last?

Portfolio Longevity Analysis

Using Monte Carlo simulations based on historical market returns, here's the probability your money lasts:

Assumptions:

• Starting portfolio: $875,000
• Annual withdrawal: $32,813 (3.75% initial rate)
• Inflation adjustment: 2.5% annually
• Asset allocation: 60% stocks, 40% bonds
• Social Security: Continues for life (inflation-adjusted)

Probability of Portfolio Survival:

Years	Your Age	Portfolio Survival Probability
20 years	84	98%
25 years	89	92%
30 years	94	85%
35 years	99	78%

Interpretation: There's approximately 85% chance your portfolio lasts 30 years (to age 94), which exceeds average life expectancy.

What Could Go Wrong:

1. Poor sequence of returns: Major market decline in first 5 years of retirement devastates long-term sustainability.

Mitigation: Maintain 2-3 years expenses in stable assets (bonds, cash) to avoid selling stocks during downturns.

2. Higher-than-expected inflation: If inflation averages 4% instead of 2.5%, purchasing power erodes faster.

Mitigation: Social Security adjusts for inflation; consider TIPS bonds for inflation protection.

3. Healthcare expenses: Unexpected medical costs or long-term care needs can rapidly deplete savings.

Mitigation: Long-term care insurance, health savings account (if available), robust emergency fund.

4. Longevity: Living to 95+ increases portfolio depletion risk.

Mitigation: Consider delaying Social Security (higher lifetime guaranteed income), annuitizing portion of portfolio.

What Could Go Right:

• Strong market returns early in retirement
• Lower-than-expected healthcare costs
• Part-time income supplementing portfolio
• Downsizing home, reducing expenses
• Inheritance or other windfalls

Adjustments for Different Scenarios

Scenario 1: Mortgage Paid Off

Budget impact: Housing drops from $1,410 to $310 (just taxes/insurance)

Monthly savings: $1,100

Options:

• Increase travel/lifestyle spending
• Reduce portfolio withdrawals (extends portfolio life)
• Accelerate emergency fund building
• Support family members

New sustainable spending: $5,800/month

Scenario 2: Delaying Social Security to Age 67

Benefit increase: $2,450 → ~$2,825/month ($375 extra)

Bridge strategy: Draw more from portfolio ages 64-67, then reduce withdrawals when higher Social Security begins.

Long-term benefit: Higher guaranteed lifetime income provides additional security against portfolio depletion.

Scenario 3: Single Person (No Spouse)

Adjustments needed:

• Social Security: Same $2,450/month
• Healthcare: Similar costs
• Housing: Potentially lower (smaller home)
• Food: $350/month (reduced from $564)
• Transportation: $300/month (one vehicle)
• Utilities: $300/month (smaller home)

Single person budget could work on: $3,800-$4,200/month

Scenario 4: Higher Healthcare Costs

If chronic conditions require $1,000/month in healthcare:

• Reduce discretionary spending by $295
• Adjust travel budget
• Consider relocating to lower cost-of-living area

The budget allows some flexibility but chronic high medical costs would require lifestyle adjustments.

Scenario 5: Part-Time Work

Working 10-15 hours weekly at $20/hour:

• Additional income: $800-1,200/month
• Reduced portfolio withdrawals
• Mental/social engagement benefits
• Extended portfolio longevity

According toAARP research, many retirees find part-time work fulfilling and financially beneficial.

Tips to Make Your Money Last Longer

Strategy 1: Flexible Withdrawal Approach

Rather than rigid 3.75% withdrawals regardless of market conditions:

In strong market years (+15%):

• Take slightly higher withdrawal
• Replenish cash reserves
• Fund larger discretionary purchases

In weak market years (-15%):

• Reduce discretionary spending 10-15%
• Draw from cash reserves rather than selling investments
• Delay major purchases

This "guardrails" approach can extend portfolio life significantly.

Strategy 2: Geographic Arbitrage

Cost of living varies dramatically:

High-cost areas:

• San Francisco, NYC, Boston: 150-200% of national average
• Your budget would be extremely tight

Moderate-cost areas:

• Phoenix, Denver, Atlanta: 100-110% of national average
• Budget works comfortably

Low-cost areas:

• Midwest cities, South, rural areas: 80-90% of national average
• Budget allows more discretionary spending or reduced withdrawals

Consider: Relocating from high-cost area could reduce expenses 20-30%.

Strategy 3: Downsize Housing

If current home is larger than needed:

• Sell, capture equity
• Purchase smaller home or rent
• Add proceeds to portfolio
• Reduce maintenance, utilities, property taxes

Example: Selling $400,000 home, purchasing $250,000 home adds $150,000 to portfolio (17% increase).

Strategy 4: Tax-Efficient Withdrawals

Strategic Roth conversions: In years with lower income (before RMDs begin), convert Traditional IRA to Roth:

• Pay taxes now at lower rate
• Future withdrawals tax-free
• Reduces future RMDs
• More flexibility for managing tax brackets

Harvest capital gains: In years with 0% capital gains bracket (taxable income under ~$89,000 married), sell appreciated investments tax-free.

Strategy 5: Delay Social Security (If Possible)

Waiting until age 70 increases benefit 76% vs. age 62:

• Age 64 benefit: $2,450/month
• Age 70 benefit: $3,728/month ($1,278 more monthly)

Break-even age: Approximately 80-82

If family history suggests longevity beyond 82, delaying Social Security often makes sense despite drawing more from portfolio initially.

Strategy 6: Consider Annuity for Portion of Portfolio

Single Premium Immediate Annuity (SPIA):

• Convert portion of portfolio to guaranteed income
• Removes longevity risk for that portion
• Reduces flexibility but increases security

Example: $200,000 annuity at 64 might provide ~$1,100/month for life, reducing portfolio withdrawal needs.

Conclusion

Retiring at 64 with $875,000 in savings and $2,450 monthly Social Security is absolutely achievable—and for many Americans, represents a stronger financial position than average. The numbers work: a conservative 3.75% withdrawal rate combined with Social Security provides approximately $4,700-$4,800 monthly after taxes, enough for a comfortable retirement.

Your monthly budget reality:

✅ Total net income: ~$4,700-$4,800/month ✅ Housing (with mortgage): $1,410 or ~$310 if paid off ✅ Healthcare: $705 (drops after Medicare at 65) ✅ Food: $564 ✅ Transportation: $470 ✅ Utilities & personal: $752 ✅ Discretionary/travel: $376 ✅ Buffer: $235

Key success factors:

1. Maintain spending flexibility—be willing to reduce discretionary spending during market downturns
2. Address the pre-Medicare year—budget adequately for healthcare costs at 64
3. Consider your mortgage—entering retirement mortgage-free provides significant breathing room
4. Don't ignore taxes—plan withdrawals strategically across account types
5. Build in buffers—unexpected expenses happen; maintain emergency reserves
6. Stay flexible on location—geographic arbitrage can stretch your budget significantly

The honest assessment: $875,000 plus Social Security provides a solid retirement—not luxurious world travel and country club memberships, but comfortable security with room for modest enjoyment. If your expectations align with this reality, retire confidently. If you're expecting significantly more, consider working another 2-3 years to build additional cushion.

Your retirement success depends less on the exact numbers and more on realistic expectations, disciplined spending, and flexibility to adapt as circumstances change. With $875,000 and Social Security at 64, you have the financial foundation—now it's about building the retirement life you want within that framework.

For additional retirement planning tools and calculators, explore resources fromFidelity Retirement Planning,Vanguard Retirement Tools, or consult with a fee-only financial planner throughNAPFA.

Your retirement is mathematically viable. Now make it personally fulfilling.

Frequently Asked Questions

Can I retire at 64 with $875,000?

Yes, $875,000 combined with $2,450 monthly Social Security can support retirement at 64 for most Americans. Using a conservative 3.75% withdrawal rate, you'd have approximately $4,700-$4,800 monthly after taxes. This supports a comfortable but not extravagant lifestyle, particularly if your home is paid off and you're in a moderate cost-of-living area. The key is realistic budgeting and flexibility to adjust spending based on market conditions.

How much monthly income can I expect from $875,000 in retirement savings?

Using a sustainable 3.75-4% withdrawal rate, $875,000 generates approximately $2,734-$2,917 monthly before taxes. Combined with $2,450 Social Security, total gross monthly income would be $5,184-$5,367. After federal and state taxes (varying by location), expect net monthly income of approximately $4,600-$5,000. Your specific amount depends on asset allocation, tax situation, and state of residence.

What's the biggest risk to my retirement budget at 64?

Healthcare costs before Medicare eligibility at 65 represent the biggest immediate risk—expect $500-700 monthly for marketplace insurance. Long-term risks include sequence of returns risk (major market decline early in retirement), inflation exceeding projections, and unexpected longevity requiring portfolio to last longer than planned. Having 2-3 years of expenses in stable assets and maintaining spending flexibility addresses most risks.

Should I pay off my mortgage before retiring at 64?

If possible, yes. Eliminating a $1,100 monthly mortgage payment would significantly improve your monthly cash flow and reduce your required portfolio withdrawals. However, don't deplete emergency funds or retirement savings to pay off a low-interest mortgage. If your mortgage rate is under 4% and you'd sacrifice liquidity, maintaining the mortgage while investing may be mathematically advantageous—but being mortgage-free provides psychological comfort and budget flexibility.

Is $2,450 in Social Security enough to retire on?

Social Security alone ($2,450/month) isn't enough for most retirements—it covers basic expenses but leaves little for healthcare, emergencies, or quality of life. However, combined with $875,000 in savings generating additional $2,700+/month, the total income of $5,000+ monthly is sufficient for a comfortable retirement. Social Security provides a stable foundation; your savings provide flexibility and additional security.

How does retiring at 64 vs. 67 affect my finances?

Retiring at 64 versus 67 means: (1) three additional years of drawing from savings instead of contributing, (2) reduced Social Security benefits (approximately 13% lower than Full Retirement Age), (3) one year of expensive pre-Medicare healthcare, and (4) potentially three more years of portfolio longevity needed. Financially, working to 67 could mean $200,000+ more in lifetime resources. However, health, job availability, and quality of life considerations often justify earlier retirement.