MW My wife and I have $20 million and plan to retire in 5 years. What's our annual retirement allowance?

By Alessandra Malito

'My spouse and I are 66 and 59. We keep our finances separate. We do not have children.'

Dear Help Me Retire,

My spouse and I are 66 and 59, respectively. We keep our finances separate. We do not have children. She owns our apartment in New York City that is worth $2 million and has no mortgage. I own a house in eastern Long Island worth $4.2 million. I owe $2.7 million on it with a 2.25% interest-only mortgage rate that has four more years left on it.

We are both planning on retiring in five more years. I have a combined $1 million in my IRA and 401$(K)$. I have $12 million in the stock market in a very good, diversified portfolio with a lot of Berkshire Hathaway $(BRK.B)$ A shares. I also have $1 million in gold. She has $2 million in stocks and an IRA.

We will both receive the maximum Social Security when we retire. How can we calculate what our retirement allowance will be? We live a very nice life, but aren't insane with our spending and live below our means. We are both in excellent health and have three parents living in their late 80s.

Two Multimillionaires

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Dear Multimillionaires,

I receive letters from frustrated people when this column responds to letters like yours because not many near-retirees are in a position to worry about how to spend millions of dollars in retirement (or even $1 million).

That said, I'm going to respond by pointing out that even the wealthiest of the wealthy can mess up their retirements, and there are factors to look out for whether you've got $22 million in assets, or $220,000.

First, you need to have a clear picture of what you and your wife want for your retirement: Where you want it to be, how you want to spend your time, what you expect it to cost - or what you're willing to spend on it. That $2.7 million mortgage is a perfect example.

Do you have questions about retirement, Social Security, where to live or how to afford it at all? We want to hear from you. Join the conversation in our Facebook community: Retire Better with MarketWatch.

I'm asked often if near-retirees should pay off their mortgages before retiring, and the answer is "it depends." Mortgages aren't automatically in the category of "bad debt" like credit-card debt, especially when there's an interest rate as low as yours - unlike those 6%-plus rates we're seeing currently).

Still, $2.7 million on a mortgage in retirement is a lot of money, and a term that is set to expire in the next few years means you will have to decide quickly if you can pay it off in full, extend it or sell the place and move elsewhere.

You know a mortgage is bad for your retirement if it will hurt you to pay it when you get to that next life stage. If you're stressed about making mortgage payments, or it eats into your retirement assets enough to strain your monthly income, then you've got your answer.

Strategizing on Social Security

You mention you and your wife will receive maximum Social Security benefits, but that's only if you wait until your Full Retirement Age to reap the full amount you're due. If you claim any time before your Full Retirement Age, or FRA, you get a permanent reduction of what you would have gotten at FRA.

If your wife is planning to retire in five years, she'll be well past her FRA but you may not have reached it yet. I'm not sure if you just turned 59 or are expecting to turn 60 this year, but either way, your FRA is 67 (that's for anyone born after 1960), which means you'd be about two or so years short if you started claiming as soon as you retired in five years, too.

As you may know, the alternative is delaying: you get more Social Security the longer you delay past FRA to age 70. Not that you and your wife necessarily need to do that, but if longevity is on your side and you don't need the money right away, it's a strategy other high-earning retirees do to make even more money in retirement.

Also, analyze all of the strategies that incorporate spousal and survivor benefits. Spousal benefits may not matter much to either of you if you're both eligible for the maximum amount, but survivor benefits - when considering delayed credits - could mean more money for the widow or widower if the deceased spouse held off on claiming.

In other words, if you wait until age 70 to claim, you'd get about 8% more in benefits for each year you delayed until age 70. If you predecease your wife, she'd get the higher of her benefit or your benefit, including those delayed credits (and vice versa if she were to predecease you).

Writing an estate plan

While we're on the discussion of survivor benefits, it is fine to keep your finances separate, but make sure you have an estate plan in place. No one wants to end up having to untangle messy beneficiary rules, or worse, have to deal with probate court during such a sad and difficult time in your life.

Make sure you've clearly listed out each other, or whomever else you want as beneficiaries, make your plans with wills or trusts and create healthcare proxies and other important legal documents so you're both in good shape should something unfortunate happen.

As for your retirement allowance? That comes down to your lifestyle. One guideline often used is the 4% rule, even though it's been contested (some people say it calculates a figure that is actually more money than retirees need every year).

Either way, you calculate 4% of the balance of your portfolio in the year you retire to see what you'd withdraw that first year (and then you adjust accordingly in the years to follow). So if you were only to draw down that $12 million portfolio, for example, you're looking at $480,000 a year.

That might look like too much to you, or maybe just right, or perhaps not enough. Make a spreadsheet listing your anticipated expenses, both fixed and discretionary. After you've accounted for your mortgage, utilities, taxes, car loans, insurance, groceries, healthcare, pet care, entertainment, trips, how do you feel?

Of course your spending may change when you get to retirement, so think through what those changes may be and add a new page to your spreadsheet. Feel free to run numerous scenarios.

Choosing a financial adviser

Given your net worth and the fact that your finances and assets are split between you and your wife, this would be a good time to work with an adviser. You don't have to go with the first person you meet. Vet advisers by asking for their credentials, how they are paid, their investment strategies, if their clients have similar backgrounds to yours or anything else you think is important.

Back to my opening gambit: given your circumstances, you both need to analyze what you mean when you say you live below your means. You may be living below your means right now, but your definition of "below our means" could be a small fortune for other retirees. When you stop working, despite your millions of dollars in the bank, you could put yourself in harm's way by continuing to live a lifestyle you can't afford.

That's not to say you need to deprive yourself, or sell the New York City apartment. It just means you and your wife have to be honest with yourselves about what is affordable or adjust what you want to keep but maybe spend less on - for example, if you take five trips a year, cut that back to two or look for ways to downsize your utility bills.

There are many major league athletes and actors who, once upon a time, had millions of dollars, big mansions, yachts and endless lines of credit thanks to the huge salaries they earned while working. But money can go quickly. You do not want to be in retirement on a fixed income when that happens.

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Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com

-Alessandra Malito

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May 13, 2025 11:26 ET (15:26 GMT)

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