When Melissa and James Carpenter wrapped up their final year of work in San Diego, they were riding high. Melissa (60), a recently retired software project manager, and James (62), a mechanical engineer turned hobby woodworker, had saved diligently and lived modestly. With no debt, grown children, and a $2.3 million portfolio, they assumed the hard part was behind them.

But within months of retirement, the cracks in their plan began to show. Despite doing everything “right,” the Carpenters were forced to face an uncomfortable truth: their retirement strategy had serious flaws.

Let’s unpack their story — and what you can learn to avoid the same missteps.

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Their Background: The Picture-Perfect Retirement… On Paper

• Ages: James (62), Melissa (60)
• Location: San Diego, CA
• Married, two adult daughters
• Total Portfolio: $2.3 million
• Home: Paid off, worth $1.2 million
• Retirement Income Needed: $135,000/year through age 80, then $95,000
• No pensions or annuities
• Healthcare: Covered through James’s COBRA for 18 months, then ACA

Their savings included:

• $1.5M in James’s 401(k)
• $500K in a joint brokerage account
• $300K in Melissa’s rollover IRA
• $40K in checking/savings

No Roth IRAs. No long-term care insurance. No real withdrawal plan.

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The Wake-Up Call: Risk Without Reward

Melissa and James invested aggressively throughout their working years — 70% stocks, 25% bonds, 5% cash — and saw great growth.

But the same portfolio, unadjusted for retirement, was a ticking time bomb.

Problem #1: Overexposure to Market Risk

• Risk score: 72/100
• Monte Carlo success rate: 69%
• Potential market drop in crash scenario: -$1,050,000
• Spending gap if Long Term Care (LTC) is needed: -$40K/year in late 80s

Retirement is not the time to gamble. Their portfolio was built for growth — not stability.

✅ The Fix: Reallocating Using a “Bucket” Approach

By segmenting their assets into short-, medium-, and long-term needs, they rebuilt their portfolio with these allocations:

• Short-term (5 years of income): $675K in cash equivalents and short bonds
• Mid-term (5–10 years): 50/50 balanced fund
• Long-term (10+ years): Global equity and dividend growth strategy

New Monte Carlo Success Rate: 89%
Potential loss in bear market: -$710K (down from $1.05M)
Average return: 8.2%
Dividend yield: 4.1%
Expense ratio: Down from 0.60% to 0.18%

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Social Security Timing: The $87,000 Mistake

James planned to start Social Security at 63. Melissa wanted to wait until 67. They never considered the long-term effects.

✅ The Fix: Delay Strategically

After analysis, they followed this revised strategy:

• Melissa: Claims at 68
• James: Delays until 70

This added over $87,000 in lifetime benefits and reduced the need to draw heavily from investments early on — protecting their portfolio in down markets.

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Withdrawal Order: When “Common Wisdom” Fails

They planned to live off their brokerage account first, then tap into the IRAs later. Sound familiar? It’s what most retirees are told to do.

But when we modeled both strategies, the results were clear:

Option A: Conventional Order (Brokerage → IRA)

• Lifetime taxes: $935,000
• Net portfolio at age 95: $780K

Option B: Reverse Order (IRA → Brokerage)

• Lifetime taxes: $850,000
• Net portfolio at 95: $910K

Savings: $85,000
Better long-term flexibility
Less tax drag in later years

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Roth Conversions: A Game-Changer

Melissa and James had never considered Roth conversions. But with relatively low taxable income early in retirement, they had a window.

✅ The Fix: Strategic Roth Conversions (2025–2029)

They converted about $80K/year from their IRAs while staying under the Medicare IRMAA threshold. This:

• Reduced lifetime taxes by $280,000
• Built a $400K Roth bucket by age 70
• Reduced future RMDs and gave them tax-free flexibility for large expenses

New Success Rate With LTC Risk: 83%
Required spending cut for long-term care: Only $3,000/year

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Lessons from the Carpenters’ Near-Collapse

1. Growth isn’t the same as safety.
   A strong portfolio must adapt for retirement income.
2. The order of withdrawals can make or break your plan.
   Don’t just default to “brokerage first” — it might cost you hundreds of thousands.
3. Social Security is more than a monthly check.
   Timing your benefits well protects your portfolio and increases long-term success.
4. You can’t afford to ignore tax planning.
   Roth conversions during early retirement can be one of the most powerful tools to improve lifetime outcomes.
5. Long-term care planning needs to be built in — now.
   Without a plan, it’s your portfolio — or your family — that pays the price.

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Final Word: Don’t Let Comfort Become Complacency

Melissa and James thought retirement would be simple. But like so many others, they learned that having money isn’t enough — you need a plan for that money.

Their story is a powerful reminder: a solid retirement isn’t about guesswork or outdated rules of thumb. It’s about precision across investments, taxes, and income strategies.

If you’re nearing retirement or already there, don’t leave it to chance. Learn from their mistakes. Get a second opinion. And make sure your plan actually works — before you’re six months in and scrambling to fix it.

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