Worked example
Retiring at 62, before Medicare
The same amount leaving the portfolio each month, taken from different accounts. What that did to the health insurance bill, the tax bill, and the income left over.
This is a constructed example, not a customer. Nobody in it is real. The figures were invented to show how the pieces interact, then run through the planner so the numbers on this page are the ones the software actually produced — not illustrations drawn by hand.
It is educational information, not financial, tax, or legal advice, and nothing here is a recommendation for anyone. Every assumption is listed below so you can see exactly what the answer depends on.
The situation
A single 62-year-old stops working. Social Security is not being claimed until 67, and Medicare does not start until 65. That leaves three years to fund from savings, with health cover bought on the open market.
They have $605,000, and — this is the part that matters — it is not in one place:
| Account | Balance | How a withdrawal is treated |
|---|---|---|
| Traditional 401(k) | $380,000 | The whole withdrawal counts as income |
| Taxable brokerage | $145,000 | Only the gain counts — here, 40% of the value |
| Cash savings | $60,000 | Already taxed; the withdrawal is not income |
| Roth | $20,000 | Not income |
They want roughly $4,500 a month to live on. The question is not whether the money lasts. It is which accounts it should come out of first — and whether that choice makes any real difference.
Why the source matters before 65
Health insurance bought through the marketplace is priced against your income — specifically a measure called modified adjusted gross income, or MAGI. The lower it is, the more help you get with the premium.
In retirement you have unusual control over that figure, because you largely decide your own income by choosing what to withdraw and from where. A dollar taken from a traditional 401(k) counts in full. A dollar of cash savings does not count at all, because it was taxed years ago. A dollar from a brokerage account counts only to the extent it is a gain.
So two people can take the identical amount out of their savings, spend the identical amount, and report very different incomes.
What actually happens at the thresholds
It is worth being precise here, because this is widely described inaccurately. Premium help does not stop dead above 400% of the federal poverty level. It tapers — as income rises, you pay a larger share of the premium yourself, and the change is gradual rather than a precipice.
There is a genuine step, though, and it sits lower down. Below 250% of the poverty level, a Silver plan carries cost-sharing reductions — lower deductibles and lower out-of-pocket costs. Cross that line and they stop. That is the threshold this example runs into.
Two ways to fund the same three years
Both versions of this plan are identical in every respect but one: which accounts pay for the years between 62 and 65. Everything else — the balances, the growth rates, the Social Security claim at 67, the spending — is the same.
| Monthly withdrawal, ages 62–65 | Version A | Version B |
|---|---|---|
| From the 401(k) | $5,500 | $1,200 |
| From cash | — | $1,400 |
| From the brokerage | — | $3,000 |
| Total leaving the portfolio | $5,500 | $5,600 |
Version A is the intuitive move: the retirement account is the biggest pot, so use it. Version B spreads the same money across three accounts, so only part of it lands in MAGI.
What the planner produced
These are the figures for the first phase, ages 62 to 65.
| Ages 62–65 | Version A | Version B |
|---|---|---|
| Modified adjusted gross income | $66,000 | $31,805 |
| Health care | $700/mo | $159/mo |
| Silver plan cost-sharing reductions | No | Yes |
| Income tax | $5,779/yr | $1,676/yr |
| Income left to spend | $4,318/mo | $5,301/mo |
| Portfolio at 65 | $536,174 | $529,271 |
The same money left the portfolio, and version B had $983 a month more to spend — around $11,800 a year. Roughly $541 a month of that is a smaller health insurance bill; the rest is a smaller tax bill. The cost is about $6,900 less in the portfolio at 65.
That $983 is what the planner produced for one specific set of inputs: a single filer, that particular split across four accounts, that cost basis, no state income tax, and the marketplace subsidy rules as they stand in 2026. Change any one of them and the figure changes. It shows how the pieces interact — it is not a number to expect.
Note what version A did not do. At $66,000 its income is above 400% of the poverty level, and it still receives premium help — because the help tapers rather than stopping. What it lost was the cost-sharing reductions, by crossing the 250% line. That is the threshold doing the work here, not a cliff at 400%.
What this does and does not show
The comparison above covers the three years before Medicare only, and that is deliberate.
Once Medicare begins at 65, marketplace subsidies stop being the question, and the two versions of the plan hold different balances — version B has spent much of its cash and brokerage, version A has spent much of its 401(k). What happens from there depends on decisions this example does not make, so comparing the two over a full retirement would say more about those later choices than about the one being examined. Both versions run to 90 without exhausting an account, and that is all the later years are here to demonstrate.
Some fair questions this raises, which the example does not answer for you:
- Spending taxable accounts early leaves more inside the 401(k). That balance is still taxable later, and it eventually comes out under required minimum distributions. Is the earlier saving worth the later position?
- A brokerage account being spent down is a brokerage account no longer compounding. Over a long retirement, which effect dominates depends on returns nobody knows in advance.
- Cash spent in the bridge years is cash unavailable for an emergency at 70.
Those are trade-offs, not errors — and they are the sort of thing worth testing against your own numbers rather than taking from anyone's example.
The full report
The complete plan for version B, exported from the planner exactly as it comes out of the software — every phase, the tax working, the health care costs, the year-by-year balances.
Download the example report (PDF)
32 pages. It is the report for the constructed example on this page, not a template for anyone's own situation.
Every assumption behind the numbers
So the figures above can be checked rather than taken on trust:
- Household: single filer, retires at 62, plan modelled to 90.
- Balances at 62: 401(k) $380,000 · brokerage $145,000 · cash $60,000 · Roth $20,000.
- Cost basis: 40% of the brokerage value is gain, so 40% of a sale counts as income.
- Growth: 401(k) and Roth 7%, brokerage 10%, cash 3.75%. Inflation 3%.
- Social Security: $2,400/month, claimed at 67, with a 2.6% annual cost-of-living assumption.
- State income tax: none. A state that taxes retirement income would change the tax line.
- Phases: 62–65, 65–67, 67–73, 73–80, 80–90.
- Health care: marketplace cover before 65, Medicare from 65, using 2026 poverty-level figures — 100% at $15,060, 250% at $37,650, 400% at $60,240.
- Not modelled: a spouse, part-time work, a pension, a mortgage, an inheritance, long-term care, or any one-off spending.
Marketplace subsidy rules are set by legislation and change. These figures reflect the rules as modelled in 2026; if the rules move, the health care line moves with them.
Run it on your own numbers
The interesting version of this exercise is the one with your balances in it. The planner is a one-off purchase, runs entirely on your own computer, and none of your figures leave it.
Try the interactive demo See the planner
The demo needs no signup and nothing to install.
This page is general education only. It is not financial, tax, investment, legal, healthcare, Social Security, Medicare, estate, or retirement advice, and it is not a recommendation for any person. The example is a simplified, constructed illustration and does not describe a real customer. Retirement rules, tax law, and healthcare costs change. Confirm any decision with a suitably qualified professional and official sources before acting.