Introduction
Stacy is 62, recently laid off, and wondering whether she can afford to retire — or whether she needs to start job hunting again.
She has $1.5 million saved, a modest pension, and a major priority: continuing to pay for health insurance for her daughter, who is still in college.
For many people who want to retire before age 65, healthcare becomes the biggest challenge. This case study shows how Stacy can retire now, maintain her financial security, and continue covering her daughter’s health insurance — all through careful income planning, Social Security timing, and tax strategy.
Stacy’s Financial Snapshot
| Item | Amount |
|---|---|
| Brokerage Account | $800,000 |
| Traditional IRA | $600,000 |
| Roth IRA | $100,000 |
| Monthly Pension | $385/month |
| Target Monthly Spending | $9,000 + healthcare costs |
She lives in a high cost of living area (Los Angeles), which makes budgeting even more important.
Monthly Income Goal
Stacy needs:
-
$9,000/month for regular living expenses
-
Plus enough to cover health insurance for herself and her daughter
So, we needed to see if her savings could reliably generate that level of income — without running out of money.
Can She Afford to Retire Now?
Yes — but the key is where and when her income comes from.
If she claims Social Security now (at 62):
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Monthly benefit: ~$2,700
-
Plus small pension: $385
-
Remaining ~$6,500/month withdrawn from savings
-
She qualifies for health insurance subsidies if she keeps her taxable income calibrated correctly.
This plan works — as long as she manages withdrawals strategically.
Why Health Insurance Costs Matter So Much
At her income level:
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If her Modified Adjusted Gross Income stays below ~ $84,600, she qualifies for ACA subsidies
-
Her insurance premium would be around: $385/month
-
Without subsidies, the same plan costs over $1,100/month
So the goal becomes managing taxable income, not just spending.
Withdrawal Strategy (The Key Insight)
Stacy should:
-
Pull early retirement income primarily from her brokerage account
(because only gains, interest, and dividends are taxable) -
Supplement selectively from Roth IRA when needed
(tax-free and doesn’t affect subsidy eligibility) -
Avoid large IRA withdrawals before age 65
(to avoid pushing income too high and losing subsidies)
This allows her to:
✅ Cover living costs
✅ Keep taxable income low
✅ Maintain affordable health insurance
Social Security Timing: Now vs Age 70
We compared both options:
| Claim at 62 | Claim at 70 |
|---|---|
| Lower benefit now | Higher benefit for life |
| Smaller withdrawal needed later | Larger withdrawals early |
| Ensures income immediately | Pays off more if she lives long-term |
If Stacy expects to live into her 80s+, delaying to age 70 increases her lifelong retirement income — approximately $500/month more after age 70.
Long-Term Sustainability
Even after planning for:
-
Inflation
-
Market fluctuations
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Healthcare cost increases
Stacy’s plan remained strong and sustainable.
She can retire now — confidently.
Final Takeaways
✅ Retiring at 62 is possible — with the right withdrawal strategy
✅ Health insurance subsidies can save $700+/month
✅ Using brokerage + Roth withdrawals preserves her IRA for later
✅ Delaying Social Security may increase lifetime income
