I am 62 years old with $1.75M between IRA and cash plus social security. Is it time to retire?

With retirement just around the corner, a few more years of work can seem daunting. But before you make any final decisions, you need to make sure you can retire safely.

Here, we have a profile with about $1.75 million in savings in addition to Social Security. Can you retire now? It depends on factors specific to your life and finances.

Here are some important things to consider.

Talk to a financial advisor today about the best way to achieve your financial goals.

Organize your finances

First you need to be aware of your financial picture to date.

“The first thing anyone should do is make sure they’ve established enough emergency funds,” said Jeremy L. Suschak, CFP® with DBR & Co. “Secondly, we suggest you pay off any high interest debts that may exist. Third, the person should establish an estate plan…Fourth, the person should ensure that they have adequate insurance coverage.”

In other words, get organized. Before you retire, be sure to consider the main financial issues you will face before you leave your job. Do you have enough for surprise expenses? Have you paid off major debts? Are you ready for supplemental and long-term care insurance?

And, Suschak said, what will your expenses look like?

The latter will tell you whether you “should” retire.

With $1.75 million in savings, you can almost certainly pay the bills. For example, say you withdraw $50,000 a year. This will pay for basic food and housing in most places and will last you 35 years even without accounting for Social Security benefits.

But you may want more than basic food and shelter. This is where budgeting comes in. What does your lifestyle look like? How much are you spending on housing now? How much do you spend on food, entertainment and travel? And how do you want all of this to change once you retire?

A good rule of thumb is to assume you’ll need about 80% of your expenses before retirement, so start there and work backwards.

A financial advisor can help you with retirement and wealth management.

Calculate your Social Security income

Next, find out your Social Security benefits.

If you start collecting Social Security at age 62, the SSA will reduce your lifetime benefits to 70% of their possible value. That means you can collect up to $2,572 per month starting in 2023. You can also retire at age 62, but delay collecting benefits, pushing your maximum benefits to $4,555 if you wait until age 70.

In any case, the amount you receive will be based on the Social Security credits you earned while working. Make sure you have an idea of ​​what it will be.

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Manage investments

Finally, get your money out of cash.

As Suschak told SmartAsset, you should consider tactical opportunities and long-term strategy for this money. Most importantly, move that million dollars into an account “that aligns with (your) risk profile and long-term investment goals.”

Shifting money from cash to investments will make a huge difference in your retirement income. The same goes for managing your current IRA. For example, say you want to keep a safe and conservative approach to retirement. You could put the entire $1.75 million into an annuity and potentially collect $10,753 per month (about $129,000 per year). Or you could take a riskier approach by putting everything in an S&P 500 fund. With the market’s historical 10% annual rate of return, that could bring in $175,000 a year — if you can handle the volatility of losses and years in decline.

Or you could split the difference. As recommended by Tim Maurer, Chief Advisory Officer for Signature FD, you can spread your investments for security and growth according to your needs and financial flexibility.

For example, say you need $4,500 per month ($54,000 per year) to pay bills. Social Security aside, you can roll your IRA into an annuity that generates $5,224 per month in safe, guaranteed income for life. Then you could invest $1 million in an S&P 500 fund and get an average return of 10%. With your needs in mind, you can escape the volatility of the stock market while chasing its gains.

It is important to have a diversified portfolio according to your risk tolerance. Talk to a financial advisor to build your investment strategy today.

Conclusion

With $1.75 million in cash and investments, plus Social Security benefits, you can almost certainly afford to retire early. Whether you should do so is another question, one that depends entirely on your needs and lifestyle.

Tips for early retirement

• Early retirement has become a buzzword for many people these days. With increasingly demanding careers, it’s perhaps no surprise that people would want to maximize their wealth and get out when they can. If this describes you, here’s what you should know.

• A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be difficult. The free SmartAsset tool matches you with up to three verified financial advisors serving your area, and you can have a free introductory call with your matched advisors to decide which one you think is right for you. If you’re ready to find an advisor who can help reach your financial goals, get started now.

• Keep an emergency fund handy in case you face unexpected expenses. An emergency fund should be liquid — in an account that isn’t exposed to significant fluctuations, such as the stock market. The trade-off is that the value of liquid cash can be eroded by inflation. But a high interest account allows you to earn compound interest. Compare savings accounts from these banks.

Photo credit: ©iStock/JLco – Julia Amaral

The post I am 62 years old, have $1 million in cash, $750,000 in an IRA and Social Security. Should I withdraw now? appeared first on SmartReads by SmartAsset.