How Much Do You Need to Retire Comfortably in Scottsdale, Arizona?

Take a realistic Scottsdale couple, David and Linda. Both are 62 and recently retired, with $3.2 million across IRAs, a brokerage account, and cash, plus a paid-off home worth about $900,000. They aren't extravagant, but they aren't cutting corners either. Property tax and insurance, pre-Medicare health coverage, golf, dining and travel, desert home maintenance, and ordinary living costs put their spending between $90,000 and $130,000 a year. That's before gifts to family or one-time costs like a car or a new roof.

Scottsdale isn't expensive across the board the way coastal cities are. The pressure comes from specific places: housing carrying costs even on a paid-off home, lifestyle spending, healthcare expectations, and what desert heat does to roofs, pools, and HVAC systems. People who anchor to Arizona's reputation as an affordable state tend to underestimate all four.

A 4% withdrawal from $3.2 million is $128,000 a year. If all of it comes out of a traditional IRA, 2026 federal tax is about $11,000 and Arizona tax is about $2,400, which leaves roughly $114,600 to spend. That covers the middle of their range and falls short at the top. The tax bite is smaller than most people expect at this income, because the standard deduction shelters the first slice and most of the rest is taxed at 10% and 12%.

The bigger tax problem shows up later. Money left in pre-tax accounts keeps growing, and at 75 required minimum distributions force it out whether they need it or not. Stack RMDs on top of Social Security and the same couple can land in the 22% or 24% bracket and cross into IRMAA Medicare surcharges. The years between retirement and Social Security are usually the cheapest window they will ever get to convert part of the IRA to Roth.

Spending isn't flat either. The first ten years of retirement are usually the most active and the most expensive: travel, home projects, helping adult children. Healthcare costs climb later while fixed costs stay put. That front-loads pressure on the portfolio in exactly the years when a market drop does the most damage.

Start with after-tax spending, not a portfolio rule. Add up what you actually spend, then work backward through federal and Arizona tax to the withdrawal you need. The table on this page does that for three spending levels.

Then subtract what Social Security will cover once it starts. A couple with $50,000 a year of combined benefits needs far less from the portfolio after claiming, which is why claiming age and Roth conversions in the gap years are usually worth more than chasing extra return.

Finally, stress-test it. A plan that works at an average return can fail if the first five years are bad. Run your numbers with a 25% drop in year one and see whether your spending still holds.

• Assuming Arizona's affordable reputation applies to a Scottsdale lifestyle.
• Planning around gross withdrawals instead of after-tax spendable income.
• Assuming spending drops right after retirement, when it usually rises for the first several years.
• Leaving everything in pre-tax accounts until RMDs force large, fully taxable withdrawals.
• Using a fixed withdrawal amount without stress-testing an early market decline.