If you have $3 million and you’re ready to retire, how much can you actually afford to spend?

$120,000 a year? $150,000? $180,000?

It sounds like a straightforward question, but retirement planning rarely produces one perfect spending number.

In this episode, Greg Welborn of First Financial Consulting explains why the better question isn’t “What is the maximum I can withdraw?” but rather, “What can I comfortably spend while maintaining enough flexibility if retirement doesn’t unfold exactly as planned?”

Using the example of a 62-year-old retiring with $3 million invested, Greg walks through the assumptions behind a retirement-income projection. Investment returns are only one part of the equation. Inflation, Social Security, taxes, healthcare costs, longevity, major purchases, gifts, travel, and changes in spending over time can all influence how much a retiree can sustainably withdraw.

One of the biggest risks is sequence-of-returns risk. A portfolio may earn a reasonable average return over a long period, but those returns won’t arrive evenly. Someone who experiences strong returns early in retirement can have a very different outcome from someone who experiences significant market losses in the first few years—even if both ultimately earn the same long-term average return.

Greg also explains how Monte Carlo simulations and retirement stress testing can help account for this uncertainty. Instead of assuming one smooth investment return every year, these models test many possible sequences to see how a retirement strategy may perform across a range of outcomes.

But investment returns aren’t the only thing worth stress testing. A retirement plan should also consider what happens if you retire earlier than expected, inflation stays higher than projected, you or your spouse experiences a long-term care event, you make a major purchase, or your spending and tax situation change.

The composition of your $3 million matters too. Assets held in taxable accounts, traditional retirement accounts, Roth accounts, and other investments can create different tax consequences and levels of flexibility.

Ultimately, retirement planning should not be about finding the largest number a spreadsheet says you can spend. The goal is to develop a reasonable spending range, build in guardrails, review the plan regularly, and maintain enough flexibility to make adjustments when life or the markets don’t go according to plan.

Topics discussed:

• Retiring with $3 million
• Retirement spending and withdrawal rates
• Sequence-of-returns risk
• Monte Carlo simulations
• Retirement stress testing
• Inflation, taxes, and healthcare
• Long-term care
• Flexible spending and guardrails
• Portfolio sustainability

Related Reading
How to Stress-Test Your Retirement Plan
Why So Many Retirees Fear Outliving Their Money

The information discussed in this episode is intended for educational purposes only and should not be considered individualized financial, investment, tax, or legal advice. Everyone’s financial situation is different, and the strategies discussed may not be appropriate for every investor.

First Financial Consulting is an independent, fee-only fiduciary financial advisory firm providing comprehensive financial planning and investment management services.