When Jack and Linda Thompson retired at age 60, they felt cautiously optimistic. After decades of hard work—Jack as a civil engineer and Linda as a high school counselor—they had managed to save $1 million in retirement accounts. They lived in Springfield, Illinois, a charming mid-sized city with a reasonable cost of living—but yes, Illinois taxes retirement income, which meant their nest egg had a few more cracks than they’d hoped.

The Setup

Jack and Linda’s portfolio was split evenly:

• $334K in a Roth IRA
• $333K in a Traditional IRA
• $333K in a brokerage account

They also expected $24,000/year in Social Security, starting at age 62. Their home was paid off, and they had no debt. Their goal? To live comfortably, travel modestly, and help their grandkids with college someday.

Year 1: Age 60

They decided to start with a 4% withdrawal rate, giving them $40,000/year from their investments. Combined with Linda’s part-time tutoring income ($6,000/year), they were living on $46,000/year—not lavish, but enough for groceries, utilities, and the occasional weekend getaway.

Taxes, however, took a bite. Their Traditional IRA withdrawals were taxed as ordinary income, and Illinois taxed a portion of their retirement income, including some of the brokerage gains. Their net income after federal and state taxes was closer to $42,000.

Ages 65–75: The Golden Decade

At 65, they both began collecting Social Security—$24,000/year total. They adjusted their withdrawal rate to 5%, pulling $50,000/year from their portfolio. Their total gross income was now $74,000/year.

But taxes were still a factor:

• Traditional IRA withdrawals triggered federal income tax.
• Brokerage account gains were taxed at long-term capital gains rates.
• Social Security became partially taxable due to their income level.
• Illinois taxed IRA withdrawals, though it exempted Social Security.

After deductions and senior credits, their net income hovered around $66,000/year. They used the extra cushion to travel to Arizona in the winters and help their granddaughter buy her first laptop for college.

Ages 76–85: Adjusting for Health & Inflation

Healthcare costs began to rise. Linda needed knee surgery, and Jack was managing diabetes. They bumped their withdrawal rate to 6%, pulling $60,000/year from their portfolio. Combined with Social Security, their gross income was $84,000/year.

But inflation had crept in. Groceries, gas, and medical bills were higher. Taxes also increased slightly due to higher withdrawals. Their net income was around $75,000/year, but they were spending more of it on essentials.

They downsized their travel and focused on local hobbies—gardening, volunteering, and hosting family dinners.

Ages 86–90: Legacy & Simplicity

By age 86, Jack had passed away peacefully. Linda continued living in their home, now supported by Social Security and a reduced withdrawal rate of 4%. Her expenses were lower, but so was her energy.

She hired help for yard work and used her Roth IRA for tax-free withdrawals to cover unexpected costs. Her net income was around $55,000/year, which was enough to live simply and comfortably.

Before her 90th birthday, Linda set up a small scholarship fund at the local high school in Jack’s name—funded by the remainder of their brokerage account.

Final Thoughts

Jack and Linda’s story shows that $1 million can go a long way, but it’s not a magic number. Taxes, inflation, health, and lifestyle choices all shape the journey. Their diversified portfolio gave them flexibility, and their thoughtful planning allowed them to live with dignity, joy, and purpose.

If you’re planning your own retirement, remember: it’s not just about how much you save—it’s about how you spend, where you live, and how you prepare for the unexpected.