Financial Case Study: Are We on Track for Retirement?

Category: Retirement & Wealth Planning

Case Study Type: Pre-Retirement Planning

This hypothetical case study walks through a pre-retirement couple’s situation — saving done right, plan for turning the pile into a paycheck not yet built — and shows how the pieces fit together: claiming age, Roth conversions, an income floor, and a realistic healthcare bridge. Names and numbers are illustrative.

Client Profile

• Names: John & Susan (fictional names)
• Ages: 60 & 58
• Occupations: John – Engineer (Still working); Susan – Former Teacher (Retired)
• Current Income: John – $120,000/year; Susan – No active income
• Assets:
  • 401(k): $850,000
  • Roth IRA: $150,000
  • Traditional IRA: $200,000
  • Taxable Investment Account: $100,000
  • Savings: $50,000
  • Home Value: $400,000 (Paid Off)
• Liabilities: None
• Monthly Expenses: $6,500
• Projected Social Security Benefits:
  • John: $3,000/month (at 67)
  • Susan: $1,500/month (at 67)

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Understanding This Financial Case Study

John and Susan had been diligent savers, accumulating over $1.3 million in retirement accounts and owning their home outright. However, they weren’t sure if their savings were enough to retire comfortably or how to create a sustainable income strategy while minimizing taxes and IRMAA (Medicare) surcharges.

John still enjoyed working but wanted to retire in five years if it was financially feasible. Susan, already retired, wanted to ensure John wasn’t working longer than necessary. Their primary concerns were:
✅ Outliving their savings (since both had parents who lived into their 90s)
✅ Minimizing taxes on withdrawals to avoid unnecessary IRMAA penalties
✅ Reducing market volatility exposure as they approached retirement
✅ Bridging the healthcare gap until Medicare eligibility

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Building Their Retirement Plan

1. Retirement Timing & Income Strategy

Run the numbers on a household like this and a five-year retirement runway is realistic — provided the income sources are sequenced correctly. At that point, their planned income would draw from three layers:
🔹 Social Security
🔹 Withdrawals from investments
🔹 A tax-efficient withdrawal order designed to stay under key bracket and IRMAA thresholds

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2. Social Security Strategy

John’s full retirement age (FRA) Social Security benefit would be $3,000/month, but delaying until age 70 would increase it to ~$3,720/month. Susan could claim a spousal benefit at 67.

👉 The typical sequencing in a situation like this:
✔ The higher earner delays to 70 to maximize the guaranteed lifetime check — and, just as importantly, the survivor benefit the lower earner inherits later.
✔ The lower earner claims at full retirement age to bring some Social Security income into the household sooner.
✔ Investment withdrawals bridge the years before the higher earner claims, opening a window of unusually low taxable income for Roth conversions.

Why? This approach helps preserve their assets longer while securing the highest possible guaranteed income.

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3. Managing Taxes: Roth Conversions & IRMAA Planning

One major issue was their large pre-tax retirement accounts ($1.2M total). If left unchecked, RMDs (Required Minimum Distributions) would force them into a higher tax bracket in their 70s, possibly pushing them into IRMAA surcharge territory for Medicare premiums.

👉 The bucket-planning approach would point to:
✔ Annual Roth conversions in the $50,000–$75,000 range during the early-retirement, pre-Social-Security years, sized to fill the lower brackets without spilling into the next one.
✔ Converting before Social Security and RMDs are layered on, when taxable income is at its lifetime low.
✔ Reducing the future RMD base, lowering lifetime tax liability, and keeping them out of IRMAA territory in their seventies.

💡 Bonus: Their Roth IRA would now grow tax-free, providing a tax-efficient income stream for later retirement.

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4. Investment & Risk Management: Protecting Their Portfolio

Their investment allocation was too aggressive (70/30 stocks/bonds) for a couple nearing retirement. A downturn could significantly impact their nest egg if they needed to withdraw funds during a market dip.

👉 The structural fix would look like this:
✔ Reallocate a portion of the portfolio into a fixed-indexed annuity with a guaranteed-lifetime-income rider, sized so the rider’s future monthly check — combined with Social Security — covers the bills the household has identified as non-negotiable. The goal isn’t growth. The goal is to take a known piece of essential retirement spending off the market entirely.
✔ Trim equity exposure modestly but preserve a growth bucket for long-horizon wealth and inflation protection.
✔ Implement a Now / Soon / Later bucket strategy:

• Short-Term (0-5 years): Cash & low-risk assets to cover early retirement withdrawals.
• Mid-Term (5-10 years): A mix of conservative investments & moderate growth.
• Long-Term (10+ years): Stocks & Roth IRA for tax-free, inflation-beating growth.

Why a Fixed-Indexed Annuity in This Plan? They needed two different things from two different parts of the portfolio. The growth bucket — invested in equities, sized to a longer time horizon — does the work of outpacing inflation and funding discretionary spending and legacy goals. The fixed-indexed annuity, with its lifetime-income rider, does a different job: it produces a contractually guaranteed monthly check for life, which means the recurring bills get paid regardless of what the market does in any given year. That separation of jobs is the point. The annuity is not chosen as a higher-yielding bond substitute; it is chosen because it is the simplest way to put a floor under their essential spending.

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5. Bridging the Healthcare Gap Before Medicare

Since John planned to work until 65, he could stay on his employer’s health plan, but Susan needed coverage until Medicare eligibility.

👉 What I recommended:
✔ A private ACA plan with premium tax credits.
✔ Utilizing HSA contributions to cover tax-free medical expenses in the future.

💡 This plan ensured they had affordable coverage while keeping healthcare costs low.

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Final Plan & Outcome from This Financial Case Study

After implementing these strategies, John and Susan:
✅ Had a clear retirement timeline and felt confident in their plan.
✅ Reduced their future tax burden through strategic Roth conversions.
✅ Avoided IRMAA surcharges by controlling RMDs and taxable withdrawals.
✅ Protected a portion of their portfolio with indexed annuities.
✅ Had a plan for Susan’s healthcare until Medicare eligibility.
✅ Created an estate & legacy strategy for tax-efficient wealth transfer.

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🔹 Key Takeaways from This Financial Case Study

• Start Roth conversions early to reduce RMDs and avoid IRMAA penalties.
• Delaying Social Security maximizes guaranteed income.
• A fixed-indexed annuity isn’t a bond substitute and isn’t a growth vehicle. Its job is a contractually guaranteed monthly check underneath the bills that have to be paid no matter what the market does. Bonds keep doing what bonds do — covering near-term spending without forcing equity sales at the wrong moment.
• A tax-efficient withdrawal strategy extends retirement savings.
• Plan for healthcare before Medicare kicks in.

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The Lesson Behind the Numbers

The takeaway from John and Susan’s hypothetical isn’t novel. Retirement income is a sequencing problem more than a savings problem, and the order of decisions — claiming age, Roth conversions, where the income floor sits, how the healthcare bridge works — compounds. Walk through your own version of the same exercise with your real numbers in front of you.

For the framework that ties these pieces together, see Bucket Planning for Retirement Income.

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This article is published by Confluence Media Group LLC, an independent publisher of educational financial content. Thomas Clark is a Series 65 Investment Advisor Representative. The information provided is for educational and informational purposes only and is not personalized financial, tax, or legal advice. Past performance does not guarantee future results. All investing involves risk, including potential loss of principal. Consult a qualified professional before making financial decisions.

Confluence Media Group LLC is a separate entity from Confluence Capital Management, the investment advisory practice through which Thomas Clark provides advisory services. Advisory services are not offered through this publishing platform.

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