How Much Can 70-Year-Olds Afford to Spend from Accumulated Savings of $4 Million?

It is always interesting to review spending levels recommended by advisors and financial commentators for hypothetical retired households and compare them with amounts generated using the Actuarial Financial Planner (AFP) workbooks.In his June 28, 2026 article, “Why a $4 Million Nest Egg at 70 Really Only Buys $88,000 of Real Annual Spending,” Carl Sullivan walks readers through a series of calculations for a hypothetical married couple, both age 70, and concludes that a $4 million nest egg ultimately provides only about $88,000 per year of spending after taxes, healthcare costs, and other deductions.Based on our analysis using the AFP for married couples, we estimate that under a different, but reasonable set of assumptions, the spending amount from the couple’s nest egg could be approximately 40% higher. In this post, we will walk through Mr. Sullivan’s calculations and compare them with results generated using the AFP.Mr. Sullivan’s NumbersThe hypothetical couple begins by applying something close to the traditional 4% Rule and determines that they can withdraw approximately $152,000 in the current year and increase that amount annually with inflation.Note that 4% of $4 million equals $160,000. However, a withdrawal of $160,000 combined with the couple’s assumed Social Security income of $58,000 may increase Medicare premiums, so we assume the article instead uses a withdrawal amount of approximately $152,000.From this amount, Mr. Sullivan subtracts:Federal income taxes of $25,000State income taxes of $8,000Medicare premiums of $15,000Out-of-pocket medical costs of $6,000Long-term care insurance premiums and/or reserve funding of $10,000Leaving approximately $88,000 available for spending.For purposes of comparison, we assume that these expenses will generally increase with inflation over time.Applying the 4% Rule implies that each dollar of annual real spending requires approximately $25 of assets. In Mr. Sullivan’s example, the implied cost is somewhat higher:$4,000,000÷$152,000=$26.32Thus, the article effectively assumes that each dollar of annual real spending requires approximately $26.32 of retirement capital.Our NumbersUsing AFP default assumptions for a married couple age 70, we estimate that the cost of funding one dollar of current annual spending for this couple is approximately $19.20, which is roughly equivalent to a 5.2% initial withdrawal rate.Several factors contribute to this lower cost:The household members are already age 70 rather than age 65.Approximately 60% of their spending is assumed to be essential and 40% discretionary.Discretionary expenses generally have lower funding costs because they can be reduced if future experience is unfavorable and are determined using a risky discount rate of 8%.The AFP assumes that household expenses decrease by 33% following the first death (default).Spending needs are valued separately by expense category rather than by applying a single withdrawal-rate rule.For this example, we assume that household expenses decline by approximately 33% after the first death. While actual experience will vary from household to household, a reduction in spending following the death of one spouse is commonly observed and is reflected in the AFP default assumptions.Based on these assumptions:$4,000,000÷19.2=$208,333Thus, the couple could initially withdraw approximately $208,333 per year in real dollars.From this amount we subtract:Federal income taxes of approximately $37,500State income taxes of approximately $12,000Medicare premiums of approximately $20,000Out-of-pocket medical costs of $6,000Long-term care insurance premiums and/or reserve funding of $10,000The increase in estimated taxes and Medicare premiums reflects the larger withdrawal amount and the possibility that the couple would likely be subject to higher tax and IRMAA tiers.This leaves approximately:$208,333-$37,500-$12,000-$20,000-$6,000-$10,000=$122,833or almost 40% more than the $88,000 estimated in Mr. Sullivan’s analysis.Understanding the DifferenceNeither analysis is inherently right or wrong. Different estimates of retirement spending capacity arise because different assumptions are being made regarding:LongevityInflationSurvivor expensesSpending flexibilityTaxesHealthcare costsInvestment performanceThe key difference is that the AFP explicitly reflects these factors rather than embedding them in a single withdrawal-rate assumption.As a result, the AFP often produces spending estimates that vary significantly from those generated using a fixed withdrawal rate.Key TakeawaysThe traditional 4% Rule should not necessarily be applied uniformly to retirees of all ages.The cost of funding retirement spending generally declines as retirees age because expected payment periods become shorter.Discretionary expenses generally have lower funding costs than essential expenses because they are more flexible.Assumptions regarding survivor spending can affect sustainable spending estimates.Taxes, healthcare costs, and future asset-sale taxes should be incorporated into retirement spending calculations.Retirement spending estimates are sensitive to assumptions and methodologies.SummaryThe actuarial approach provides a more individualized framework than the traditional 4% Rule because it explicitly reflects planning longevity, household composition, spending flexibility, survivor needs, taxes, and healthcare costs (which are inputted in the AFP).In the example discussed here, those differences result in an estimated spending level approximately 40% higher than the amount implied by Mr. Sullivan’s analysis. It is important to note that this difference results primarily from the ages of the hypothetical household members and wouldn’t necessarily apply for younger retirees. While reasonable professionals may disagree about specific assumptions, we believe the actuarial approach offers a more robust and transparent way to evaluate retirement spending capacity.You may also wish to read our recent Advisor Perspectives article, “A Collaborative Path Forward: Integrating Monte Carlo Modeling, the Actuarial Approach, and Copilot,” (available in our articles section) which discusses how actuarial methods, Monte Carlo analysis, and AI tools can complement one another in retirement planning.