Your $1.5 Million Nest Egg Runs Out 5 Years Early When Inflation Hits 4.5%

"Using a deterministic projection model with 7% annual portfolio returns (SPY's 10-year annualized return is 13.6%) and inflation-adjusted withdrawals: Under 3% inflation, the $1.5M portfolio sustains withdrawals until approximately age 89 (year 23). Starting with $60,000 in year one, withdrawals grow to $69,700 by year five and $80,900 by year ten. The portfolio balance drops to $1.38M by year five, $1.18M by year ten, and reaches depletion around year 23."

"Under 4.5% inflation, the portfolio depletes by approximately age 84 (year 18, five years earlier. Withdrawals escalate faster: $73,500 by year five and $93,100 by year ten. The portfolio balance falls to $1.32M by year five, $1.05M by year ten, and exhausts around year 18. The 60/40 allocation compounds the problem. The bond portion (AGG returned 7.5% last year but just 2.1% annualized over 10 years) fails to keep pace with 4.5% inflation. Real returns turn negative."

"By year ten, purchasing power drops to $39,000 equivalent, that's a third of her buying power gone. Healthcare accelerates the damage. A $12,000 annual healthcare budget grows to approximately $21,900 in ten years at 6.5% annual inflation ($12,000 × 1.065^10). Groceries, utilities, and insurance follow similar trajectories. The XLV healthcare sector ETF returned 11.2% over the past year, reflecting pricing power that retirees absorb directly."

A 66-year-old retiree with $1.5 million in a 60/40 portfolio budgeted for 3% annual inflation but faces 4.5% inflation and 6–7% healthcare inflation. A $60,000 initial withdrawal loses substantial purchasing power — roughly $48,600 by year five and about $39,000 by year ten under higher inflation. A $12,000 healthcare budget can grow to roughly $21,900 in ten years at 6.5% inflation. Deterministic projections with 7% portfolio returns show depletion near age 89 under 3% inflation and near age 84 under 4.5% inflation, while the bond sleeve fails to keep pace and real returns turn negative.

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