Life Begins at 65!

Author: Dan Searles and John Stohlman
Posted: Tuesday, December 29, 2009

How old is old? It used to be age 65.  After all, that is when you could get your full Social Security check. Most people retired at 65 and were considered done with life. In the late 1970’s, a major corporation forced Dan’s grandfather into mandatory retirement on his 65th birthday. He was given a gold watch (literally). At 64, he was a vibrant, top of his game executive. At 65, he was told he was “finished.”

Like many people his age, he begged to differ with the analysis.  He started a new firm and continued to work and thrive another 15 years. As many of us know, working, living, being productive, and just plain having fun now extends way past mandatory retirement. William Shatner, the actor, won an Emmy (TV’s highest honor) at age 74 for his lead performance in the ABC series “Boston Legal.” Lee Iaccoca, former CEO and savior of Chrysler, had come out of semiretirement at 81 to spur Chrysler’s new ad campaign and to research alternative energy vehicles.

The old saying, “Life begins at 65,” has never been truer. But, it does come with problems. Especially if you are not extraordinarily wealthy, like the two previously mentioned gentlemen, and that is what takes us to the question of the month.

"My wife is 62 and I am 67. We have accumulated $400,000 in our 401K plans and also have $333 a month from an old Carpenters Union pension. My

wife does not qualify for Social Security, but my benefit is about $1,350 a month. How much money can I take out of our 401K’s each year to supplement our income without running out of money before we die?"



S. & D.H. of Rockville, MD

First things first. According to Periodic Life Tables available at, your wife has a life expectancy of 21.43 years and you are expected to live 14.68 more years. So both of you have to plan on being around for quite awhile.

While your wife has a life expectancy of 21.43 years and you 14.68 years, we found a very detailed table, shown above, that has a 25-year life expectancy, or “retirement period,” rather than say, a 15-year period. However, graphically it will give you some good ideas. Using the table below, provided by T. Rowe Price Associates, you can see that, if you invest in 60% stocks and 40% bonds and withdraw 6% of your money annually, you will have a 53% probability that your money will last your lifetime. However, many people refuse to put that much of their money into the stock market. But that raises another issue. If you have 20% of your money in stocks and have 80% in bonds, you only have a 25% chance of your money lasting your lifetime!!!

How much can you spend in retirement?

The table shows the estimated probability of maintaining several spending or withdrawal amounts throughout retirement, depending on the investor’s asset allocation and time horizon. The analysis assumes pretax withdrawals from tax-deferred assets and can be applied for any size retirement portfolio.

                                    25-Year Retirement Period
        Initial                                            Stock/Bond Mix
Withdrawal Amount                         80/20     60/40     40/60     20/80
                                                        Simulation Success Rate
 7%                                                 39%         30%         17%         4%
 6                                                     57             53             44             25
 5                                                     77             78             78             73
 4                                                     91             94             97             98

Source: T. Rowe Price Associates Winter 2005 Issue
Based on hypothetical rates of return and assumptions for asset classes indicated. Actual Results will vary and may be better or worse than the simulation scenarios.

The moral of the story is this:  The amount of money you are able to withdraw from your investments depends on the performance and type of the investments themselves. According to T. Rowe Price, a properly designed stock portfolio offers the best investment opportunity for a lifetime income stream, but that can be volatile. So what’s a conservative investor to do? One, either live with the ups and downs of the stock market, or two, adopt a more conservative mix of stocks and bonds and withdraw less than 5% ($20,000) of your portfolio each year. Either way, you will have to watch your portfolio closely and adapt your income stream to market conditions.

Alternatively, you could contact a local Certified Financial Planner® or an independent insurance agent who works with immediate fixed annuities. While fixed annuities can be expensive, many today will guarantee you and your wife a lifetime income. Remember, these guarantees are based on the claims paying ability of the issuer.  Essentially, you sell all or part of your principal in exchange for a guaranteed lifetime income stream. Either of these strategies, or a combination of both, could potentially give you the income supplement you desire.


Dan Searles and John Stohlman, owners of Medallion Financial Group, are CFP®’s, financial planners and Registered Representatives with over 25 years of experience in the financial services industry, offering securities and advisory services through National Planning Corporation (NPC), member FINRA/SIPC, a Registered Investment Adviser. Medallion Financial Group and NPC are separate and unrelated companies. They manage over $250 million of client assets. For further info, questions or comments regarding this article, Dan and John can be reached at 301-990-9704 or 1-800-878-9704 or

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