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A 3.9% withdrawal rate yields $81,900 annually but dividend income only covers $73,500.
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Medicare Part B premiums rose to $202.90 monthly in 2026. Total healthcare costs could reach $8,000 to $12,000 annually.
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Working one additional year delays withdrawals and increases Social Security benefits by roughly 8% per year until age 70.
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A recent study identified one single habit that doubled Americans’ retirement savings and moved retirement from dream, to reality. Read more here.
At 64 with $2.1 million saved, the question isn’t whether retirement is possible but whether your withdrawal strategy and portfolio composition can sustain 25-30 years of expenses while navigating taxes, healthcare costs, and market volatility.
The traditional 4% rule suggests withdrawing $84,000 annually from $2.1 million. However, Morningstar’s 2026 research recommends a more conservative 3.9% starting rate ($81,900), reflecting current market valuations and sequence-of-returns risk that hits hardest in the first five years. Retiring into a market downturn and selling shares to fund withdrawals locks in losses that compound over decades.
Your portfolio appears income-focused with positions in dividend payers like Verizon (6.77% yield), Johnson & Johnson (2.49% yield), and Chevron (4.13% yield). At an estimated blended yield of 3.5%, you could generate roughly $73,500 in annual dividend income without selling shares. That leaves a $10,500 gap if following the 3.9% guideline, requiring strategic withdrawals from your 401(k) or taxable accounts.
Turning 65 in 2026 brings Medicare eligibility, but costs are rising. The standard Medicare Part B premium is $202.90 monthly in 2026, up from $185 in 2025, totaling nearly $2,435 annually. Add Part D prescription coverage, supplemental insurance, and out-of-pocket expenses, and healthcare could easily consume $8,000-$12,000 per year before major medical events.
The tax picture depends on account structure. If most of your $2.1 million sits in a traditional 401(k), every withdrawal is taxed as ordinary income. For married couples filing jointly in 2026, the 12% bracket extends to $100,800 of taxable income, while the 22% bracket covers income up to $211,400. Withdrawing $82,000 from a 401(k), combined with Social Security benefits starting in a few years, could push you into the 22% bracket. Qualified dividends in taxable accounts receive preferential 15% rates for most retirees.
The split between 401(k) and taxable accounts creates opportunity. Prioritize spending from taxable accounts first to manage your tax bracket, especially before required minimum distributions begin at age 73. This preserves tax-deferred growth while utilizing lower capital gains rates. Consider partial Roth conversions during lower-income years before Social Security begins, filling up the 12% bracket without triggering higher rates.
Your dividend portfolio needs scrutiny. AT&T cut its dividend 47% in 2022, a reminder that high yields sometimes signal distress. UnitedHealth, despite strong cash flow, has faced regulatory concerns that have impacted its stock performance. Quality dividend aristocrats like Johnson & Johnson and Procter & Gamble offer lower yields but greater reliability and growth. Balance income needs with the reality that a 20-30 year retirement requires portfolio growth to outpace inflation.
Working one additional year dramatically improves sustainability. It delays portfolio withdrawals, allows another year of contributions, postpones Social Security (increasing monthly benefits by roughly 8% annually until age 70), and reduces the years your portfolio must fund.
Calculate your actual annual spending needs rather than relying on withdrawal rate guidelines. Track fixed costs like housing, healthcare, and insurance separately from discretionary spending you can adjust during market downturns. Assess whether your dividend income covers essential expenses, creating a buffer against selling during corrections. Review your 401(k) versus taxable account balance to optimize withdrawal sequencing.
Most Americans drastically underestimate how much they need to retire and overestimate how prepared they are. But data shows that people with one habit have more than double the savings of those who don’t.
And no, it’s got nothing to do with increasing your income, savings, clipping coupons, or even cutting back on your lifestyle. It’s much more straightforward (and powerful) than any of that. Frankly, it’s shocking more people don’t adopt the habit given how easy it is.