Let me tell you about a couple I'll call Dan and Susan. They retired at 62 — both healthy, both excited, both convinced they had enough.
And on paper, they did. Between their combined retirement accounts, a small pension from Susan's teaching career, and Social Security starting at 67, they figured they'd be comfortable.
Here's what they didn't fully account for.
The three-year healthcare gap
Between 62 and 65, they had no employer health coverage and weren't yet eligible for Medicare. Private health insurance for the two of them ran about $1,800 per month. That's $64,800 they hadn't budgeted over those three years.
Inflation's quiet math
Their monthly expenses at retirement were about $6,200. Ten years in, those same expenses cost closer to $8,100. The groceries, the property taxes, the prescriptions — everything crept up. Their income didn't keep pace.
The withdrawal spiral
To cover the gap, they pulled more from their accounts each year. By year 12, they'd burned through a larger portion of their portfolio than they'd planned for by year 20.
What they'd do differently
This isn't a horror story. Dan and Susan are doing okay. But they'll tell you they wish they'd explored income options earlier — specifically, options that could have provided a predictable income stream to cover that gap between their fixed sources and their actual expenses.
There are strategies designed to help create that kind of floor. One approach involves setting aside a portion of your retirement funds to produce a reliable income stream — one that may continue for as long as you need it. The rest stays in your portfolio, positioned for potential growth.
It's the kind of planning that turns "we think we'll be fine" into "we know what's coming." If you're within a few years of retirement and haven't mapped out your income sources versus your actual expenses, that's worth doing now — not after you've left your job.
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Author of Indexed Annuity Secrets and founder of Pacific Ridgeway Insurance Solutions in San Diego. Navy veteran. Licensed financial professional, CA #4132743.
Fixed indexed annuities are insurance products, not investments. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. This article is for educational purposes only and is not financial, investment, tax, or insurance advice.