That $95,000 Retirement Income Only Looks Stable Until Year 15 When the Pension Runs Out

"The checks stop on the retiree's 80th birthday. Income drops to $65,000 overnight, a 32% cut at exactly the age when healthcare costs accelerate."

"To preserve the prior lifestyle, the retiree needs roughly $59,000 a year from the portfolio: $29,000 in existing inflation-adjusted withdrawals plus $30,000 to replace the pension."

"At a 6% withdrawal rate, sequence-of-returns risk does the rest, and the potential for portfolio depletion increases significantly."

A 65-year-old retiree has a total income of $95,000, including Social Security, a pension, and portfolio withdrawals. The pension is a 15-year term-certain payout, ending at age 80, which leads to a sudden income drop to $65,000. This situation is common among retirees who misunderstand their pension terms. By age 80, the retiree's portfolio must support a 6% withdrawal rate to maintain their lifestyle, which poses a risk of portfolio depletion in later years due to increased healthcare costs and market fluctuations.

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