If you’re sitting on a $3M retirement portfolio, there’s a good chance you’re underspending, not overspending. That sounds backwards, but it’s one of the most common gaps we see when we build out a full retirement income plan: careful savers who picked a “responsible-sounding” monthly number years ago and never stress-tested it against what their money could really support.

A recent case from our practice makes the point well. A couple — we’ll call them Hank and Denise, 65 and 64 — believed $12,000 a month was their number. After we rebuilt their plan from the ground up, the real number turned out to be $2,900 a month higher, without taking on any additional investment risk. The difference wasn’t found in the market. It was found in the details most generic retirement math ignores.

Why Generic Rules Fail a $3M Retirement Portfolio

Hank and Denise’s assets were split across three very different buckets: $360,000 in a joint brokerage account, $1.9 million in Hank’s 401(k), and $720,000 in Denise’s rollover IRA. That mix matters more than most people realize.

Rules of thumb like the 4% rule treat every dollar the same. But a 4% withdrawal rule doesn’t know whether your money sits in a pretax account or an after-tax account. It doesn’t know when your Social Security starts, or when expenses like private health insurance or a mortgage payoff will disappear from your budget. On a $3 million portfolio, that blind spot can be wrong by six figures a year.

When Hank and Denise first added up their needs — a $1,500 mortgage payment, travel, giving, and private health insurance until Medicare eligibility — they landed on roughly $144,000 a year, or about 4.8% of their portfolio. It matched every rule of thumb they’d ever heard, so they stopped questioning it. Simulations showed a 99% chance their plan would land above target, with a projected $1.4 million still left in their accounts. That should have felt reassuring. Instead, it was the tell that something was off: a high success rate paired with a portfolio that barely shrinks usually means you’re underspending, not playing it safe.

Social Security Timing Isn’t a Standalone Decision

Hank and Denise had planned to wait until 70 to claim Social Security, which does produce the highest lifetime benefit in isolation. But taking Social Security is never really an isolated decision. The longer you delay claiming, the longer your portfolio has to cover 100% of your income needs on its own — which means less of it is left to compound.

After running a full optimization instead of defaulting to age 62 or age 70, the better move was for Denise to start benefits immediately, taking pressure off the portfolio right away, while Hank waited until his full retirement age of 67. That approach landed within 5% of the mathematically optimal outcome while freeing up meaningful portfolio value years earlier.

Fixing the Order Withdrawals Happen In

Their original plan was to draw from the brokerage account first. That would have worked for four or five years and kept their tax bill near zero — but it was short-sighted. Every year spent avoiding withdrawals from the IRA is a year those balances keep growing, eventually pushing them into higher tax brackets and higher Medicare premium surcharges (IRMAA) down the road.

Instead, we used the years of unusually low taxable income to strategically execute Roth conversions, staying just below the first IRMAA threshold. That single adjustment reduced their projected lifetime tax bill by more than $800,000, in today’s dollars.

Rethinking the Withdrawal Rate Itself

The last major shift was abandoning a flat, inflation-adjusted withdrawal rate. Research from David Blanchett shows retirement spending doesn’t move in a straight line — it tends to run higher in the early, active years, dip through the middle years, and climb again later as healthcare costs rise. A flat withdrawal rate assumes you spend the same at 90 as you did at 65. Almost nobody actually does.

Building that spending curve into the plan, along with pre-agreed guardrails that adjust income up or down based on portfolio performance, is what unlocked the extra room. With every enhancement combined, Hank and Denise’s real number moved from $12,000 to $14,900 a month — about $35,000 more per year than they thought was possible.

Does It Hold Up When Markets Get Rough?

A bigger number only matters if it survives a bad market. Under the guardrails built into the plan, the portfolio would need to fall 44% before any income reduction — and even then, the adjustment was projected at just $600 a month. Running the plan through a 2008-style financial crisis showed the portfolio drop hard, but the paycheck kept coming, and the plan actually produced two income increases later on as markets recovered.

Across thousands of simulations, the plan still showed a 99% probability of staying above the new, higher income target for the rest of their lives — with a projected median ending balance of $1.2 million, instead of leaving several million dollars unspent.

The Takeaway

A $3M retirement portfolio isn’t a single number you divide by a withdrawal rate — it’s a system of account types, tax timing, Social Security sequencing, and a spending pattern that actually matches how people live. Hank and Denise didn’t need more risk or more money. They needed a plan that used what they already had more precisely. If your own retirement number was built on a rule of thumb rather than a full plan, it’s worth finding out what you might be leaving on the table.

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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures: https://onedegreeadvisors.com/disclosure/