MW 'We're aiming for a monthly income of $11,500': I'm 64. I've $1.5 million in a 401(k). How do I time my withdrawals?
By Quentin Fottrell
'I plan to start collecting my Social Security of $4,100 at 68'
"The first 'withdrawal' bucket will be two to six years, the second will be six to 10 years, and the last will be for the long term." (Photo subject is a model.)
Dear Quentin,
I am 64, and my wife is 65. I have $1.5 million in my 401(k). My wife receives $2,600 per month in Social Security, and I have a pension of $3,000 per month. I plan to start collecting my Social Security of $4,100 at 68. We are aiming for a monthly income of $11,500 and we are considering using a three-bucket strategy: the first "withdrawal" bucket will be two to six years, the second will be six to 10 years, and the last will be for the long term. What should I do?
Now I'm 64
Don't miss: 'I want safe returns': I'm 73 with $300,000 saved. I'm not interested in the stock market. What should I do?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.
Use reliable, consistent and ultimately liquid cash for this bucket, so you don't have to withdraw money from your 401(k) in a down market before your required minimum distributions at 73 or 75.
Dear 64,
I always like a Beatles reference.
Let's organize your buckets first. 1) Your short-term bucket (two to six years) should be cash, money-market funds, bonds and Social Security benefits. Use reliable, consistent and ultimately liquid cash for this bucket, so you don't have to withdraw money from your 401(k) in a down market before your required minimum distributions at 75. This is called managing your "sequence of returns" risk.
One woman, a member of the Moneyist's Facebook group, has a stark reminder: "Never underestimate the length of time between the start of retirement and death. These days, there is a low risk of death by heart attack, stroke and cancer. My money will definitely have to be increasing in value over my retirement time if I lived to be the age of my mother. She did run out of money because my parents had not anticipated how much they would need."
While health events happen, your lifestyle is adjustable. "Clearly, it depends on where you live and your style," she added. "Some of us are house rich and cash-flow poor. If you live in a high[-value] real-estate area, your property tax and home insurance alone can be $30,000 a year. And if you want to stay in your own home in your own neighborhood, you need to come up with a strategy to provide a good deal of money for yourself during your anticipated retirement."
For the first four years, you will need $5,900 a month to make up the shortfall of your $11,500-a-month income goal, given that your wife has Social Security of $2,600 a month and you have a pension of $3,000 a month. When you start collecting Social Security at 64, you'll add another $4,100 to the pot, which leaves you with a more modest shortfall of $1,800 a month. (Sidenote: $11,500 is not small change, but you don't mention your lifestyle, mortgage or other obligations).
2) Your medium-term bucket (six to 10 years) can have a mix of bonds and stocks. When your cash and bonds are used up, you move on to this bucket, which is still supplemented by your Social Security benefits. This brings you up to your RMDs - so for the five years before those RMDs kick in, from ages 68 to 75, given that you are 64 now, that $1,800 a month equates to withdrawals of $108,000. (Sidenote: Expect more international intrigue to rattle markets in 10 years.)
Compounding nest egg
3) The long-term bucket (10-plus years) is the compounding nest egg (your 401(k) and other brokerage accounts) that should see you through the remainder of your retirement (you won't need it after retirement). Let's say, for the sake of argument, that your 401(k) is worth a cool $1 million by then. If your spending goal is $138,000, you'll need $21,600 a year (after both your Social Security payments and your pension are accounted for).
Here's why people use the three-bucket strategy, especially when there's so much geopolitical strife rattling markets (the war in Iran, President Trump's tariffs and Russia's invasion of Ukraine, to name but three): A 20% drop in your $1.5 million portfolio immediately reduces your retirement fund by at least $300,000 or more, depending on the timing of your withdrawals. Unlike someone who is, say, 25, you don't have the same time to recover.
MarketWatch retirement columnist Jessica Hall explains it thus: "The Iran conflict has shaken global markets, from oil and stocks to food and energy. While the overall stock-market fallout has been somewhat measured, it still takes on outsize importance for those close to or in retirement. There's a 10-year window when people need to be especially careful about their investments and strategies, to assure their full retirement goes smoothly."
These are all good problems to have. As another woman on the Moneyist's Facebook (META) group commented: "My total rent, including utilities, is about $1,500 per month. I don't have a car payment or any other debt at the moment. I usually play a little golf and do some recreational activities during the week. My main other expense is groceries - I tend to eat a lot and go to the gym regularly. I'm planning to live on about $60,000 per year, so we'll see how it goes."
Retiring on $138,000 a year is not bad going, even with Uncle Sam taking his income taxes. You will likely have health challenges; Medicare premiums, deductibles and coinsurance; emergency house repairs; and one or both of you may even require nursing-home care. And lest we forget about that other retirement foe, he who stands guard in your front yard in the dead of night, counting your cash, and taking an average of 3.3% a year for sport: inflation.
Don't ask him what he wants it for.
Related: 'This is a first-world problem': I can't roll over my $800,000 401(k) from my prior employer. What did I do wrong?
More columns from Quentin Fottrell:
'We're living the simple life': I was a fisherman and my wife was a nurse. We retired with $6 million. Here's how we did it.
My PayPal account received money from the Philippines with two phone numbers listed. I called them. Big mistake.
'The bank told me I could be liable': I found out why my brother, who has a reverse mortgage, ran out of money
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-Quentin Fottrell
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April 04, 2026 09:45 ET (13:45 GMT)
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