Retirement Income Planning in Sun City: What Pre-Retirees Need to Know
Sun City is not just a retirement community. It is a case study in what happens when retirement planning meets reality.
With over 40,000 residents, Sun City is one of the largest age-restricted communities in the United States. The average resident is 73 years old. Many moved here in their 60s with a plan: sell the family home, buy a smaller place, live on Social Security and savings, golf every day.
But the plan does not always match the math. Property taxes in Maricopa County have risen. Healthcare costs have outpaced inflation. And the Social Security cost-of-living adjustments have not kept up with the actual cost of living in a community where the median home price is now $350,000+.
This is not a Sun City problem. It is a retirement income planning problem — and it is one that pre-retirees in Phoenix need to solve before they move, not after.
The Decision Framework
Factor 1: The Real Cost of Living in Sun City
Sun City is affordable compared to Scottsdale or California, but it is not cheap:
- HOA fees: $200-$400/month depending on the neighborhood
- Property taxes: ~1% of assessed value annually
- Healthcare: Banner Health is nearby, but specialist visits and procedures add up
- Transportation: Many residents need a car (or two) — public transit is limited
- Recreation: Golf, pickleball, and club memberships are not free
A realistic monthly budget for a Sun City retiree: $4,000-$6,000 for essentials, plus $1,000-$2,000 for lifestyle. Total: $5,000-$8,000/month.
Factor 2: Social Security Reality Check
The average Social Security benefit in Arizona is about $1,700/month. For a couple, that is roughly $3,400/month. But Sun City living costs $5,000-$8,000/month. The gap — $1,600-$4,600/month — must come from savings, pensions, or part-time work.
This is where retirement income planning becomes critical. It is not about maximizing Social Security. It is about bridging the gap sustainably.
Factor 3: The Withdrawal Strategy
Most Sun City retirees have a mix of:
- Traditional IRA/401(k) — taxed as ordinary income
- Roth IRA — tax-free withdrawals
- Taxable brokerage — capital gains tax
- Social Security — partially taxable depending on total income
The order in which you withdraw from these accounts affects your tax bill, your Medicare premiums, and how long your money lasts. A tax-efficient withdrawal strategy can save $5,000-$15,000 per year in taxes alone.
Factor 4: Healthcare and Long-Term Care
Medicare covers basic healthcare, but not everything:
- Dental, vision, and hearing are not covered
- Long-term care is not covered
- Prescription drug costs vary widely by plan
Long-term care insurance or a dedicated long-term care reserve is essential. A year in assisted living in Phoenix metro costs $60,000-$80,000. Three years: $180,000-$240,000. This is not optional — it is a probability, not a possibility.
Factor 5: The Part-Time Work Option
Many Sun City residents work part-time — not because they have to, but because they want to. Consulting, seasonal retail, real estate, and teaching are common. Part-time income of $1,000-$2,000/month reduces portfolio withdrawals by 20-40%, extending the life of savings significantly.
Common Mistakes to Avoid
Mistake 1: Underestimating living costs
Sun City is affordable, but not free. Many retirees budget for $3,000/month and spend $6,000. The gap comes from portfolio withdrawals that are too high, too early.
Mistake 2: Ignoring tax efficiency
Withdrawing from the wrong account first can cost thousands in unnecessary taxes. The conventional wisdom — spend taxable first, then traditional, then Roth — is often wrong for Arizona retirees.
Mistake 3: Not planning for healthcare inflation
Healthcare costs rise 5-7% annually, double the general inflation rate. A $500/month Medicare supplement plan today could be $900/month in 10 years.
Mistake 4: Forgetting about the survivor
When one spouse dies, the survivor loses one Social Security check but keeps most of the same expenses. The household income drops 30-40% overnight. Planning for this is not morbid — it is essential.
What This Looks Like in Practice
Scenario A: Couple, 65, $800,000 savings, moving to Sun City
Monthly need: $6,500
Social Security at 67: $3,400
Gap: $3,100/month = $37,200/year = 4.65% withdrawal rate
Strategy: Delay Social Security to 70 ($4,200/month), bridge with portfolio withdrawals, reduce gap to $2,300/month = 3.45%
Scenario B: Single, 62, $500,000 savings, already in Sun City
Monthly need: $4,500
Social Security at 67: $1,800
Gap: $2,700/month = $32,400/year = 6.48% withdrawal rate
Strategy: Part-time work ($1,500/month), reduce gap to $1,200/month = 2.4%, delay Social Security to 70
Scenario C: Couple, 70, $1.2 million savings, 10 years in Sun City
Monthly need: $7,000
Social Security: $4,500
Gap: $2,500/month = $30,000/year = 2.5% withdrawal rate
Strategy: Comfortable, but RMDs at 73 will force higher withdrawals. Plan for tax-efficient RMD management and Roth conversions before 73.
Schedule a Call with Zach
Every retirement income decision is personal. The rules are the same, but your situation — your savings, your health, your timeline, your family — is not.
If you are planning for retirement in Sun City or the Phoenix area and want to know what a sustainable income strategy actually looks like for your specific numbers, a 15-minute conversation can give you clarity.
Schedule a Call with Zach — Calendar Link
Zachary Holly, CFP® | Osaic Wealth | Scottsdale, AZ
Investment advisory services offered through Osaic Wealth, Inc. | Check Zach background on BrokerCheck