Retirement Readiness at 71: Balancing Work, Wealth, and Healthcare in a $3M Portfolio

For a 71-year-old retiree with $3 million in assets and $250,000 in annual income, the decision to retire or continue working hinges on a delicate interplay of economic and behavioral factors. With 2025 market conditions, rising healthcare costs, and evolving withdrawal rate benchmarks, this analysis explores whether current income and investment returns are sufficient for sustainable retirement-and how part-time work might reshape the calculus.

Sustainable Withdrawal Rates: A Shifting Benchmark

The traditional 4% rule has long been a cornerstone of retirement planning, but 2025 data suggests a nuanced approach. Morningstar's 2025 analysis recommends a 3.9% withdrawal rate for retirees aged 70–75 with a 30-year horizon, ensuring a 90% probability of portfolio sustainability. However, William Bengen's updated model-a pioneer of the 4% rule-now advocates for a 4.7% rate, reflecting improved market valuations and diversified portfolios. For retirees willing to tolerate spending flexibility, rates as high as 6% may be viable through strategies like adjusting withdrawals based on portfolio performance.

For a 71-year-old with $3 million, a 4.5%–5.5% withdrawal rate (as suggested by recent research) would generate $135,000–$165,000 annually. Combined with the $250,000 in non-guaranteed income, this creates a total pre-tax income of $385,000–$415,000. However, this assumes no additional guaranteed income sources, such as Social Security or pensions, which could significantly alter the equation.

Healthcare Costs: A Looming Financial Challenge

Healthcare expenses remain a critical wildcard. Fidelity Investments estimates that a 65-year-old retiring in 2025 will spend $172,500 on healthcare over their lifetime, while the Milliman Retiree Health Cost Index projects $275,000 for males and $313,000 for females under Original Medicare plus Medigap. For a 71-year-old, these costs are front-loaded, as healthcare spending accelerates with age.

To mitigate this, retirees should allocate a portion of their portfolio to healthcare-specific savings. A Health Savings Account (HSA), with its triple-tax advantages, becomes a strategic tool. Fidelity notes that HSA users feel more prepared for medical expenses, though adoption remains low. For a $3 million portfolio, setting aside $200,000–$300,000 in an HSA or dedicated healthcare fund could buffer against rising costs.

The Economic Case for Part-Time Work

Part-time employment offers a dual benefit: it reduces the need to deplete retirement savings and extends compounding. In 2025, the average part-time earnings for retirees aged 70–74 are $25,650 annually. While this may seem modest, it can lower the required withdrawal rate from the $3 million portfolio by 0.8%–1.2% (depending on tax implications), preserving capital for later years.

Vanguard's 2025 report underscores that working just two additional years could improve retirement readiness for 12.5% of Americans. For a 71-year-old, delaying retirement by one year could add $25,000 to the portfolio-either through earnings or reduced withdrawals-while also deferring Social Security benefits, which increase by 8% annually after age 70.

Behavioral Trade-Offs: Beyond the Numbers

The decision to work or retire is not purely economic. Behavioral studies reveal that 57% of retirees who skipped healthcare cost planning found expenses higher than expected, underscoring the psychological stress of financial uncertainty. Conversely, part-time work offers non-monetary benefits: it provides structure, social engagement, and a sense of purpose, which can indirectly reduce healthcare costs by promoting mental and physical well-being.

Yet, the trade-off is clear: working longer sacrifices time that could be spent on leisure, family, or travel. For retirees prioritizing lifestyle goals, the financial flexibility of a $3 million portfolio-combined with a 4.5% withdrawal rate-may justify early retirement, provided healthcare costs are adequately addressed.

Conclusion: A Balanced Approach

For a 71-year-old with $3 million and $250,000 in annual income, retirement readiness is achievable but requires strategic planning. A 4.5%–5.5% withdrawal rate, paired with a robust healthcare savings plan, can sustain spending for 30 years. However, part-time work offers a compelling alternative: it reduces portfolio drawdowns, extends compounding, and provides a financial cushion against rising medical costs.

Ultimately, the optimal path depends on individual priorities. Those valuing financial security may choose to work part-time, while others may prioritize lifestyle goals, leveraging the portfolio's size and flexibility. In either case, 2025's evolving market and healthcare landscape demand proactive, adaptive planning.