'Fancy cars hold no appeal': My wife and I have a 99% chance of outliving our savings. Why don't we spend it all?

By Quentin Fottrell

'I'm 68, she's 74, and we're both in good health. We married later in life and have no children or close family remaining'

Confidence should not give way to recklessness. (Photo subjects are models.)

Dear Quentin,

My wife and I are trying to reconcile the financial advice we receive from our advisory team, which is often conservative, with the retirement lifestyle we envision and believe we can comfortably afford. I'm 68, she's 74, and we're both in good health. We married later in life, have no children or close family remaining, and expect that any eventual legacy we leave will be charitable.

After more than 40 years of diligently maxing out our 401(k) and 403(b) accounts, building substantial home equity and accumulating other assets along the way (some inherited), we finally took the plunge last June. We sold our longtime home at a nice profit, liquidated most of our other assets, moved across the country and purchased our dream retirement home: fewer rooms, but more space.

Our financial adviser was shocked! Yet all of his Monte Carlo simulations indicate a 99% probability that we'll never outlive our retirement assets. In fact, the projections suggest we'll likely die with several million dollars more than we had when we retired.

Charitable giving remains an important part of our plan, but the underlying dilemma was perhaps best expressed by my wife last spring when she looked at me and asked, "What have we been saving for all our lives if we're just going to keep living conservatively and die rich? I don't mind being the person whose last check bounces."

We're not interested in living extravagantly. Showy jewelry and fancy cars hold no appeal. What we do want is the freedom to travel with like-minded friends, perhaps extensively, while we're still physically able to enjoy it.

Our financial picture, in a nutshell:

-- Income: We each receive Social Security benefits based on our histories as high earners, along with two lifetime annuities. Combined, these income sources exceed our current monthly expenses by approximately $2,500.

-- Home: We have $1 million in home equity and a $700,000 mortgage. The mortgage financed the purchase of our new home, along with several hundred thousand dollars in repairs and improvements that are now complete. Our contractor keeps assuring us that the house is "bulletproof" for the next 25 to 30 years we expect to live here.

-- Retirement accounts: Our combined traditional IRA balances exceed $1.4 million, with another $70,000 in Roth IRAs.

-- Debt: We have no other significant debts or financial obligations, apart from a 0% furniture loan that we intend to pay off over time, allowing the money earmarked for repayment to continue earning investment returns in the interim.

-- Liquidity: At the moment, we're relatively cash-poor outside our Roth IRAs. However, that should change fairly quickly as we accumulate our monthly surplus and make IRA withdrawals as needed.

We've experimented with retirement simulations of our own, but we struggle to get the projected probability of success below 90%, much less find a realistic path toward exhausting our assets over the next 30 years.

We understand that required minimum distributions, income-related Medicare premiums (IRMAAs) and the possibility of future changes to Social Security all deserve consideration. But given our circumstances, we're struggling to see why we shouldn't move beyond the traditional 4% withdrawal rule and adopt a more aggressive spending strategy while we're still young and healthy enough to enjoy the money.

Are we placing too much confidence in Monte Carlo success rates? Are we underestimating the financial consequences of one of us dying relatively soon, or of either of us requiring long-term care? How should we think about the trade-offs between spending more now, preserving financial flexibility for the future and leaving a charitable legacy?

We've spent decades saving responsibly. Now we're trying to figure out whether it's time to give ourselves permission to enjoy more of what we've worked so hard to accumulate.

Feeling Footloose

Related: We stopped helping our neighbors with free home repairs and our friendship cooled. Who's to blame?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

Confidence should not give way to recklessness.

Dear Footloose,

You're walking on the sunny side of the street, for sure. But you're not quite on Easy Street.

Enjoy your retirement, by all means, but stick to a budget and don't get carried away. You have no children and, aside from your mortgage, no debt. You understandably want to loosen the purse strings - a little or a lot - so you can spend more time traveling with friends and living the life that you have spent years working toward. I love that idea, in theory, and it is eminently achievable. But allow me to be the boring, sober voice of reason: There's a vast ocean of cruises between living frugally and rolling out the proverbial red carpet every time you step outside your front door. Your modest lifestyle has gotten you this far, after all.

Three things: (1) You have a large mortgage in your late 60s/early 70s (not great if it puts pressure on your cash flow). (2) Your combined Social Security benefits and lifetime annuities exceed your expenses by $2,500 a month or $30,000 a year (great). (3) You don't say how much your mortgage payments are. If you have a 30-year mortgage at 4.5%, your monthly payment would be around $3,500, excluding property taxes and maintenance, or $5,300 a month if you have a 15-year mortgage at the same rate. So you clearly have a substantial guaranteed income (good long-term result).

Your required minimum distributions will depend on each spouse's age and account balance. On a $1.4 million balance, 3.92% would be about $54,900. That should help you build an emergency fund - something you say you lack - along with a travel budget for those trips away to make you miss your dream home. RMDs are generally taxable, and any money you don't need to spend can remain invested in a taxable account. The best part: Your regular bills are covered without the need to sell investments. This can continue as long as your figures include taxes and all expenses, and your expenses don't exceed your income.

Related: My wife cried when I found out she had only $80,000 in her 401(k). I have $2.2 million. Am I wrong to be shocked?

Monte Carlo simulations

Confidence should not give way to recklessness. With your traditional IRA and modest Roth IRA, your adviser's 99% Monte Carlo success rate is encouraging, but it depends on what the model defines as success. Monte Carlo simulations run thousands of scenarios on your portfolio and can be more accurate than the inflation-adjusted 4% withdrawal rule. But they're only as useful as their assumptions are correct. Still, I suggest you build up an emergency fund of at least 12 months of essential expenses so you can be prepared for unwelcome and unexpected surprises, whether they're medical or household expenses.

Your outlook is rosy: With your RMDs and the $30,000 annual surplus from your combined guaranteed income, you have substantial room to increase your spending, although the amount actually available will depend on taxes, expenses and how much of your RMDs you decide to reinvest. You could test a travel budget of $30,000 a year, subject to review, if you suffer from wanderlust. But you also want to take into account the possibility of a market correction or even a recession. What's more, long-term care for one person could cost $100,000 a year, depending on the facility and where you live, so you don't want to drain your savings quite yet.

Ask your adviser three questions: (1) What does the Monte Carlo 99% probability of success mean? I'm curious how much money would actually be left after 30 years, assuming your inflation-adjusted spending lasts for the next three decades, and whether it takes into account taxes, Medicare, long-term-care costs and home maintenance. (2) What happens if the stock market tanks, interest rates spike and inflation goes berserk in your first five years of retirement - especially if you're making substantial withdrawals at the same time? (3) And what happens if you spend $30,000 more on vacations each year? Does that 99% fall substantially?

When you are cruising the Mediterranean with friends, I also want you to have peace of mind.

Related: My abusive ex-husband promised $20,000 for our kids' education. Now he refuses to pay. Is he legally obligated?

By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

More columns from Quentin Fottrell:

'Just watch Judge Judy': I'm in my 70s. Why do people keep making the same avoidable financial mistakes?

'She's living the dream': My stepmother said I can buy my childhood home for $850,000. Is she taking advantage of me?

My father-in-law, 81, sold his $75,000 home to pay his daughter's $50,000 debt. How can I keep him from becoming destitute?

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-Quentin Fottrell

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10-29-26 0515ET