Retirement Financial Plan for $200,000 Savings

This guide outlines how a 65-year-old retiree with $2,500/month Social Security income, Medicare A/B, supplemental insurance, dental insurance, and $200,000 in cash can manage their savings to last through retirement. It assumes good health, a life expectancy of 85–90 years, and annual expenses of $40,000–$50,000. Always consult a financial planner for personalized advice.

• Income: $2,500/month Social Security = $30,000/year (pre-tax, partially taxable depending on other income).
• Assets: $200,000 cash.
• Expenses: Estimated $40,000–$50,000/year, requiring $10,000–$20,000/year from savings.
• Healthcare: Medicare A/B, Medigap, dental insurance. Budget for premiums ($185/month Part B, $100–$200/month Medigap) and uncovered costs (e.g., vision, hearing).
• Goal: Ensure $200,000 lasts 20–25 years, with liquidity, income, and inflation protection.

Split $200,000 into three buckets: Emergency Fund, Income Generation, and Growth/Inflation Protection.

• Purpose: Cover unexpected costs (e.g., medical, home repairs) and 1–2 years of expenses.
• Options:
  • High-Yield Savings Account: 4–5% APY (e.g., Ally, Marcus). Example: $40,000 at 4.5% yields ~$1,800/year.
  • Money Market Account: ~4.5% APY (e.g., Vanguard Money Market Fund).
  • Short-Term CDs: 6–12-month CDs at 4–4.5% (FDIC-insured).
• Why: Liquidity and safety. FDIC insures up to $250,000.

Example: $40,000 in high-yield savings for emergencies.

• Purpose: Supplement Social Security with steady, low-risk income.
• Options:
  • Treasury Securities:
    • Bonds/Notes (5–10 years): ~3.5–4% yield, state-tax-exempt. Example: $50,000 at 4% yields $2,000/year.
    • TIPS: 1.5–2% + inflation adjustment.
  • Fixed Annuity (SPIA): $50,000 yields ~$250–$300/month for life (e.g., MassMutual). Pros: Guaranteed income. Cons: Less liquidity.
  • Dividend ETFs: e.g., Vanguard Dividend Appreciation ETF (VIG, ~1.8% yield). $50,000 yields $900/year + growth.
  • CD Ladder: $50,000 in 1–5-year CDs at 4–4.5%.
• Why: Balances safety and income. Minimize taxable income to reduce Social Security taxation.

Example: $50,000 in Treasuries, $50,000 in a SPIA.

• Purpose: Combat inflation (~2–3%/year) for later years.
• Options:
  • Stock ETFs: Vanguard Total Stock Market (VTI, ~7–10% historical return). $50,000 could grow to ~$98,000 in 10 years.
  • Balanced Funds: Vanguard Balanced Index (VBIAX, 60% stocks/40% bonds, ~5–7% return).
  • I Bonds: Inflation-linked, $10,000/year max (if available).
• Why: Growth to maintain purchasing power. Limit to 20–30% to reduce risk.

Example: $60,000 in VBIAX.

• 4% Rule: Withdraw $8,000/year (4% of $200,000), adjusted for inflation. With Social Security, provides ~$38,000/year.
• Order:

1. Use interest/dividends (e.g., $2,000 Treasuries, $3,000 annuity, $1,200 ETFs).

  2. Tap emergency fund for unexpected costs.
  3. Withdraw from growth bucket last.
* **Taxes**: Withdraw from taxable accounts first. Consult a tax advisor to minimize Social Security taxation (up to 85% taxable if combined income > $34,000 single).

Example: Need $15,000/year beyond Social Security:

• $2,000 Treasury interest.
• $3,000 annuity.
• $1,000 ETF dividends.
• $9,000 from savings/CDs.

• Medicare: Budget $185/month (Part B) + $100–$200/month (Medigap).
• Dental: Budget $500–$2,000/year for uncovered procedures.
• Other Costs: Vision, hearing aids (~$2,000–$5,000/year). Consider long-term care insurance or reserve $50,000 for future care.

1. **Open Accounts**:
   * High-yield savings (e.g., Ally) for $40,000.
   * Brokerage (Vanguard, Fidelity) for $160,000.
   * Contact annuity provider (e.g., MassMutual) for SPIA quote.
2. **Invest**:
   * $50,000 in Treasury Notes/TIPS (TreasuryDirect.gov).
   * $50,000 in SPIA or CDs.
   * $60,000 in balanced fund/ETF.
3. **Monitor**:
   * Rebalance annually.
   * Adjust withdrawals based on expenses.
4. **Consult**:
   * Fee-only CFP (XY Planning Network, $1,000–$3,000).
   * Tax advisor for withdrawal strategy.
   * Estate attorney for will/trust ($500–$2,000).

• Income: ~$38,000–$38,600/year ($30,000 Social Security + $1,800 savings interest + $2,000 Treasuries + $3,000–$3,600 annuity + $1,200 ETF dividends).
• Longevity: $200,000 lasts 25+ years with 4% withdrawal and 5–6% portfolio return.
• Risks: Market downturns. Mitigate with 50–60% fixed-income assets.

• Inflation: Social Security has COLA (~2.5% in 2025). Growth bucket ensures savings keep pace.
• Taxes: Interest/dividends may increase taxable income. Use tax-efficient investments (e.g., Treasuries).
• Legacy: Create a will/trust for heirs or charity.
• Debt: Pay off high-interest debt first.
• Resources: Vanguard/Fidelity for investments, TreasuryDirect.gov for bonds, ImmediateAnnuities.com for quotes.

Consult a financial planner to tailor this plan to your expenses, state taxes, and goals. Provide monthly expenses for a refined strategy.