Retiring at 64 With $2.1 Million Means Navigating a $10,500 Annual Gap Nobody Talks About

"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."

At age 64 with $2.1 million saved, a sustainable withdrawal strategy and portfolio mix determine whether savings will cover 25–30 years of retirement expenses. A conservative starting withdrawal near 3.9% ($81,900) accounts for current valuations and sequence-of-returns risk, which is most damaging in the first five years. An income-focused portfolio with an estimated 3.5% blended yield could produce roughly $73,500 annually, leaving about $10,500 to be funded by withdrawals. Medicare eligibility at 65 introduces rising premiums and out-of-pocket costs often totaling $8,000–$12,000 annually. Taxation depends on account types; traditional 401(k) withdrawals are taxed as ordinary income and can push taxable income into higher brackets.

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