If you're in your late 50s or early 60s, you've likely done some level of retirement planning. Maybe you’ve calculated your “number” or targeted a retirement age, only to have life throw you a curveball. For many, unexpected events like a layoff can turn a well-structured retirement plan upside down.
In this case study, we explore whether a 58-year-old named Patrick—recently laid off and with $1.5 million in savings—can afford to retire early. We’ll walk through his finances, discuss critical tax planning strategies, and demonstrate how adjusting investment allocation and Social Security timing can impact long-term financial success.
Patrick is a 58-year-old single professional who was unexpectedly laid off just a few years before his intended retirement. His assets include:
His portfolio is conservatively allocated: 35% stocks and 65% bonds. His monthly expenses in retirement are projected at $4,000, or $48,000 annually, split between essentials and discretionary spending.
Patrick's healthcare costs before Medicare are a concern. However, using a premium tax credit estimator, his insurance costs are expected to be around $3,600 annually due to his relatively low taxable income.
Patrick’s income plan needs to balance spending and tax efficiency. Since he’s under 59½ and most of his retirement savings are in pre-tax accounts, careful planning is required to avoid unnecessary penalties or taxes.
Patrick starts retirement by withdrawing from his brokerage account, which includes long-term capital gains. This is a smart move because capital gains can fall into the 0% tax bracket, helping to minimize income taxes in early retirement.
As he ages, Patrick will begin withdrawing from his 401(k), which will be taxed as ordinary income. Planning when and how much to withdraw—especially before Required Minimum Distributions (RMDs) begin at age 73—is key.
Patrick initially considered taking Social Security at age 62, which would give him $1,750 per month. If he waits until his Full Retirement Age (FRA) of 67, that benefit increases to $2,500 per month.
After reviewing his plan, he decided to delay until 67, maximizing his monthly benefit. This is often a good strategy for healthy individuals with other income sources, as it reduces the risk of outliving their assets.
One of the most valuable tools Patrick used was a risk-based retirement income guardrail system. This approach provides a spending range that adjusts based on market performance.
For Patrick, the model shows he can safely spend $6,000 per month, accounting for taxes and future Social Security income. If markets perform well, that number can increase. If they drop, minor spending adjustments can be made to stay on track.
Patrick’s original 35/65 portfolio was too conservative for a potential 30+ year retirement. While bonds provide stability, they often fail to outpace inflation over time.
This bucket strategy helps cover short-term needs with low-volatility assets while allowing long-term growth through stocks. The result? Greater flexibility and higher potential returns to sustain retirement income over decades.
Since Patrick’s 401(k) holds a large portion of his retirement assets, future RMDs could push him into higher tax brackets. To prevent that, a Roth conversion strategy was recommended.
Over five years, Patrick could shift most of his funds into tax-free growth while reducing his future tax liability by an estimated $250,000.
No retirement plan is complete without testing it against real-world market conditions. Using historical data from events like the 2008 financial crisis, Patrick’s plan was modeled to see how his portfolio would hold up.
Even during severe downturns, his income would have only dropped to about $5,400 per month at its lowest, with spending adjustments made within preset guardrails. As the market recovered, his income could rebound, showing that his plan is resilient to economic volatility.
Thanks to $1.5 million in retirement savings and smart tax and investment strategies, Patrick can retire early at 58 and maintain a safe and flexible lifestyle. Key components of his success include:
If you're approaching retirement and facing uncertainty—whether from a layoff, health event, or just market volatility—it’s never too early to build a solid, tax-efficient plan. The right approach to retirement planning and tax strategies can make the difference between uncertainty and confidence.
Interested in a customized plan like Patrick’s? Schedule a free retirement assessment today to see what’s possible.
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