I’m 60 With $1.5 Million in an IRA. How Do I Make Sure This Money Lasts the Rest of My Life?

Making your savings last through retirement can be complex in practice, but all it really comes down to is your income vs. spending. In other words, you need to compare how much your portfolio can generate in a more risk-averse time in your life against how much it costs each year to maintain your lifestyle. Retiring at 60 can create some problems, as that’s earlier than you can claim Social Security and utilize Medicare. With $1.5 million in your IRA, you’ll want to carefully plan your withdrawals and account for any portfolio growth during retirement.

Do you have questions about retirement planning? Speak with a financial advisor today.

What Kind of Income Can Your Portfolio Generate?

Different assets in your portfolio can generate different results. Here’s a look at some of the more common options and the level of income they can generate.

Cash Assets

You could move parts of your IRA into depository cash assets like a high-yield savings account or certificates of deposit (CDs). This would keep your money extremely safe, but your returns may only keep up with inflation. Even if the current interest rates are high, they won’t always remain that high over the coming decades. 

Assuming a 4% return and a standard 4% withdrawal rate, you would get $60,000 in portfolio income for 25 years with this option, with your money growing at perhaps the same rate or lower.

Income Investing With Bonds and Dividends

Income investing means putting your IRA into assets like bonds and dividend stocks. These generate regular payments without the need to sell the underlying asset, making them a popular choice for retirees looking to make their portfolios last. Throughout 2024, bonds paid an average of 4.5% to 5.5%, according to the St. Louis Fed. ¹ At the middle of that range, this could give you around $75,000 per year in income, without delving into your principal.

Income Using an Annuity

Like bonds and dividends, annuities are a popular choice among retirees who are looking for security in their income. With an annuity, you buy a contract from a life insurance company that guarantees a fixed monthly payment for life based on the purchase price and other factors. According to Schwab’s fixed income annuity calculator, a single life, $1.5 million fixed-income annuity purchased at age 60 could pay more than $8,000 per month, or $96,000 per year, for your lifetime.

Mixed Asset Investing

Another possibility is to invest in mixed assets, like index funds and bond portfolios. This would let you balance growth and security as you see fit, but with more volatility. In this scenario, you would also need to sell assets to generate income.

According to Vanguard, a fairly risk-averse portfolio of 70% bonds and 30% stocks has actually generated an average annual return of 9.2% from 1926-2024. ² If you can get this type of return, you’d likely have enough to match or exceed the income options outlined above. However, be prepared to have more tax implications, as well as less liquidity assets and greater overall risk.

What Will You Collect From Social Security?

Social Security benefits are another aspect you may need to consider in your planning. Since an IRA balance of $1.5 million may mean you’ve had strong incomes over your life, let’s say you receive $2,000 starting at age 62. That comes out to $24,000 a year in Social Security benefits, which could be a substantial boon to an already fairly bright retirement savings picture.

The SSA will provide a Social Security statement, which will give you exact numbers to plan with as you approach age 62 and beyond. You might also consider consulting with a financial advisor as you plan for retirement for guidance on how to account for Social Security benefits and when to take them.

Spending and Taxes

With $1.5 million saved in an IRA, you  have several options to ensure your portfolio lasts for the rest of your  life. Including Social Security, a bond portfolio alone technically could generate enough income to satisfy your plans for retirement. The question, however, is whether or not this is enough income for you to live a comfortable life, as everyone’s individual plans for retirement are entirely unique.

Your Lifestyle and Inflation

First you’ll want to understand what your lifestyle costs. For instance, do you enjoy expensive travel, or are you happiest when left alone with your hobbies? What are your total costs, factoring in things like your home, consumer spending, bills and personal needs? It might be helpful to plan your monthly budget in retirement, because that will determine what kind of portfolio income you need to generate.

At the same time, remember that where you live will influence how inflation affects you. Nationwide, inflation averages around 2% to 4% annually, but if you live in an expensive city and/or if you rent your home, that figure can be much higher. Your portfolio returns and withdrawal rates will need to reflect that.

Required Minimum Distributions (RMDs)

While required minimum distributions (RMDs) currently start at age 73, the RMD age will rise to 75 in 2033, meaning a 60-year-old won’t have to start taking distributions from pre-tax accounts for another 15 years. 

The way RMDs are calculated is based on an IRS formula that takes into consideration your account balances, your age and your life expectancy. The younger you are and the more you have in savings, the higher this RMD will be.

Not only is this a mandatory chunk out of your retirement account, which will also no longer continue to grow, these mandatory withdrawals have tax implications as well. It’s important to factor in these deductions and costs when assessing the longevity of your retirement savings. Luckily, at age 60, you have a little while to go before you need to start worrying about RMDs. 

If you need help planning for future RMDs, use SmartAsset’s RMD calculator to get an estimate of how much you may be required to withdraw. 

Taxes

As a pre-tax portfolio, your IRA will generate income taxes on everything you take out of it. This can be managed, broadly, in one of two ways. 

First, you can plan on paying those taxes. Anticipate your income tax in your annual budget, and then adjust your spendable income down by that amount. 

Another option is to roll your IRA into a Roth IRA. You would need to pay income taxes on the entire rolled-over amount in a single tax year, reducing your savings considerably, but it would eliminate federal taxes entirely on your retirement income. Of course, you’d need to be prepared to pay that massive amount of taxes in the meantime, so this isn’t always the right move for everyone.

Insurance and Health Care

Finally, as you plan your budget and spending, don’t forget to account for insurance costs and health care needs. In addition to current insurance that you pay, such as homeowners or renters policies, in retirement you will likely need long-term care insurance and Medigap coverage. Combined, you should expect this to add a few hundred dollars per month to your bills. 

As you age, you will also likely have higher health care needs. This will mean more spending, which again will add to your budget and costs. Planning for this spending, and making sure that you fit your lifestyle and investments around it, is key to making sure your IRA lasts for your entire life.

Bottom Line

The key to ensuring $1.5 million in an IRA at age 60 lasts the rest of your life is to have a solid understanding of your income as it compares to your expenditures. Different types of portfolios will generate different levels of income, as well as risk. Your desired lifestyle during retirement, plus inflationary increases, will influence how far that income has to stretch. Other costs to account for in that calculation include RMDs, taxes, healthcare and insurance. The more solid a plan you have in place, the more likely your $1.5 million IRA balance is to last as long as you need.

IRA Management Tips

• A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• What should you do with your IRA in retirement? If you’re like most people, you’ve spent your working life thinking relatively little about this account. Check our SmartAsset’s guide to IRAs in retirement to learn more.

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