Week 8 · 55 minutes
For Retirees Only
Medicare, a safe paycheck from your portfolio, Social Security timing, and a lower tax bill.
The big idea
Retirement is a switch from accumulating to distributing. The four decisions that matter most are how you cover health care, how much you withdraw, when you claim Social Security, and which accounts you pull from first.
Planning for Medicare
Medicare is the single biggest health-care decision of your retirement, and the enrollment windows are unforgiving. Get the timing and the plan structure right once and it mostly runs itself.
- Your initial enrollment window opens three months before you turn 65 and closes three months after — miss it without qualifying coverage and you can face lifetime late penalties
- Part A covers hospital stays, Part B covers doctors and outpatient care, Part D covers prescriptions
- Choose a lane: Original Medicare plus a Medigap supplement (broad access, higher premiums) or Medicare Advantage (lower premiums, network limits and prior authorizations)
- Medicare does not cover long-term care, dental, vision, or hearing — budget for those separately
- High income raises your premiums through IRMAA, based on your tax return from two years earlier — so income moves at 63 affect premiums at 65
- Retiring before 65? Bridge the gap with COBRA or an ACA marketplace plan, where a lower taxable income can mean large subsidies
Will I run out of money? The 5% rule, honestly
The 5% rule is a practical starting estimate for retirement withdrawals: withdraw 5% of your starting portfolio in year one, then adjust for inflation each year. It is a guide, not a guarantee.
- Quick math: $1,000,000 supports roughly $50,000 a year before taxes, plus Social Security on top
- Reverse it to set a target — annual spending you need from the portfolio times 20
- It assumed a stock-and-bond portfolio and a 30-year horizon; retire earlier and you may want closer to 4–4.5%
- Sequence-of-returns risk is the real danger: big losses in the first few years hurt far more than the same losses later
- Flexibility beats precision — trimming withdrawals in a down year does more for success odds than picking the perfect number
- Keep one to two years of spending in cash or short-term bonds so you never sell stocks in a crash
When should I claim Social Security?
You can claim as early as 62 or as late as 70. Claiming early permanently shrinks the check; waiting permanently grows it. Because it is inflation-adjusted and lasts for life, delaying is the cheapest longevity insurance available.
- Full retirement age is 66–67 depending on birth year; claiming at 62 cuts the benefit by roughly 25–30%
- Every year you delay past full retirement age adds about 8% until age 70 — then the increases stop, so never wait past 70
- Married couples should coordinate: the higher earner delaying protects the survivor, who keeps the larger of the two checks
- Claiming before full retirement age while still working triggers the earnings test, which temporarily withholds benefits
- Up to 85% of benefits can be taxable depending on your other income
- Delaying makes the most sense with good health, family longevity, or other income to bridge the gap; claiming early can be right with health problems or no other resources
How do I pay the least taxes?
In retirement you control your own taxable income more than at any other time in life. Withdrawal order and timing are where the savings live.
- Know your three buckets: taxable brokerage (capital gains), tax-deferred like a 401(k) or traditional IRA (ordinary income), and tax-free Roth
- The common order is taxable first, then tax-deferred, then Roth last — but blending buckets to fill up low tax brackets usually beats draining one at a time
- The gap years between retiring and starting RMDs are prime territory for Roth conversions at low rates
- Required minimum distributions begin at 73–75 depending on birth year; large untouched IRAs can force big taxable withdrawals later
- Watch the thresholds a withdrawal can cross: Social Security taxation, IRMAA premium tiers, and the 0% long-term capital gains bracket
- Give smarter — qualified charitable distributions from an IRA after 70½ satisfy RMDs without adding to taxable income
Active learning check
Write your retirement paycheck: how much you need each year, how much comes from Social Security, and how much has to come from the portfolio.
Multiply the portfolio number by 20 to see the balance that supports it at a 5% withdrawal rate.
Lesson quiz
3 of 4 to pass1. When does your initial Medicare enrollment window open?
2. Under the 5% rule, roughly how large a portfolio supports $60,000 of annual withdrawals?
3. What happens to your Social Security benefit for each year you delay past full retirement age, up to 70?
4. Why are the years between retiring and starting RMDs a good time for Roth conversions?
Practice tasks for this week
Do these after the lesson, before you start Week 9.