How to Make Your $1 Million IRA Last the Rest of Your Life at 70

Compared to many retirees, you’re in an enviable position with $1 million in your IRA at 70. However, living out a secure, comfortable retirement that can last two decades or more takes planning. Making sure it lasts requires evaluating your personal situation, balancing risks, ensuring reliable income streams and understanding how minimum required distributions affect your finances.

A financial advisor can help you analyze your retirement income needs and build plans to make your savings last.

The basics to make savings last

If your savings are going to provide financial security for life, you need to pay attention to the basics. The keys to making your $1 million IRA last a lifetime are:

1. Spend conservatively from your IRA. A 4% annual withdrawal rate can improve the chances that your savings won’t run out.

2. Invest properly to generate solid returns while controlling risk. Consider an asset allocation of 60% stocks and 40% bonds, using low-fee index funds, rather than shooting for the highest possible returns. This will help minimize the risk involved in a market downturn.

3. Tap into other sources of income first before tapping into your IRA. Using Social Security benefits, earnings from part-time work, and annuity payments provide alternatives to spending savings.

What is your situation?

Your personal financial situation and retirement lifestyle desires will determine the most appropriate ways to use your million dollar IRA. To fill in the blanks of your future pension, ask yourself the following questions:

• How much will you budget for basic living expenses?

• What big purchases, vacations or indulgences do you want?

• How risk averse are you?

• Do you want to leave a legacy?

• Do you have health problems that require significant care costs?

• What are the expected sources of income?

• How will taxes affect your retirement income?

• What is your best estimate for the return on your IRA investments?

Answers to questions like these help you determine your withdrawal rate, asset allocation, insurance needs, and estate plans. While $1 million sounds like a lot, it may not fund an extravagant, globe-trotting lifestyle. Create realistic budget accounting for health, taxes and inflation.

If the IRA must cover more than half of your costs, a more modest standard of living or delaying retirement may be prudent.

A financial advisor can help you answer these questions and build a retirement strategy.

Retirement risk management

Retirement at age 70 can take twenty or more years. Uncertainty is inevitable when you think about such long timescales. Your retirement plan should address the following risks:

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• Investment risk is the danger of portfolio losses from causes such as market volatility and rising interest rates. Reduce investment risk by holding a mix of stocks for growth and bonds and cash for stability.

• Longevity risk means outliving your savings. Accept some market risk – with a 20 to 30 year time frame, stocks should appreciate over time. Within your equity allocation, diversify globally across capitalizations, sectors and regions. Use cheap and tax-efficient index mutual funds or ETFs. Also consider an immediate annuity, which provides guaranteed income for life. Address longevity risk by being willing to adjust your withdrawals downward during market swoons.

Health costs can also be significant in retirement. Understand your Medicare benefits and purchase additional Medigap coverage as needed. Don’t neglect to consider your possible long-term care insurance needs. Get insurance to cover risks that might require accessing your IRA unexpectedly. Review your property, accident and liability. It is possible to opt out of disability insurance.

Have questions about risk and insurance? Talk to a financial advisor today.

RMD impact

Required minimum distributions (RMDs) require you to withdraw funds from tax-deferred retirement accounts annually beginning at age 73. In your situation, the RMDs will probably be just over $40,000 per year.

Failure to accept RMDs triggers 50% penalties, so don’t neglect this. And RMDs are taxed as ordinary income, so plan for the tax impact when you take them. For example, a 4% RMD withdrawal on a $1 million IRA could create a federal tax liability of about $8,800 for someone in the 22% marginal tax bracket.

Using trusts for retirement planning

Trusts are widely used in estate planning to help manage inheritance taxes and control distribution to heirs. They can also be useful for protecting retirement savings.

Retirement trusts are specifically designed to receive retirement account assets while maintaining tax-deferred status, protecting against legal liability, and extending withdrawals over time. The remaining charitable trusts use pension savings now to generate income, while distributing the capital to charities later.

Trusts require expertise to set up properly. But these tools can structure retirement assets to last you into your golden years while you plan your legacy. If you are interested in setting up a trust, consider talking to a financial advisor.

Conclusion

With prudent management, a $1 million IRA at age 70 can easily fund two decades or more of retirement. Using realistic earnings projections and conscious spending behaviors increases the chances of success. Assess your personal situation, temper your withdrawal expectations, control your portfolio risk, and use insured income streams before accessing your IRA. Consider taxes and RMDs when planning your withdrawals. Be ready to adjust spending downwards when the markets fall. Trusts can help ease tax burdens on heirs while controlling distributions. With reasonable assumptions and balanced risk management, IRAs can provide you with lasting retirement security.

tips

• Talking to a financial advisor now can help you create viable spending and income plans and structure your retirement withdrawals to make your savings last. The free SmartAsset tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Check out SmartAsset’s Asset Allocation Calculator to get an idea of ​​how different portfolios have performed over time.

• 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.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with prospects and provides marketing automation solutions so you can spend more time converting. Learn more about SmartAsset AMP.

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