I’m 68 With $950k in an IRA. How Do I Make Sure It Lasts My Whole Life?

Longevity risk is at the heart of retirement planning. You wind down work and income, counting on savings to carry you through the rest of your life. But with careful saving and money management, it might be possible to make this money last. For example, say that you recently reached retirement age at 68 and have $950,000 in a pre-tax traditional IRA. Accounting for longevity risk, Social Security, RMDs and more can help you more accurately plan ahead.

Longevity risk is the chance that you will outlive your retirement savings. 

It’s not uncommon for a household to underestimate how long they will live and, as a result, how much money they will need. This is, in part, because population-wide averages are misleading. According to the CDC, across all Americans the average lifespan for a woman is 79.3 years old and 73.5 for a man. However, the average life expectancy for those 70 and older could be between 80 and 90, according to the SSA. 

This dramatically changes the math for retirement savings. So if you plan on retiring at full retirement age of 67, a typical household should anticipate at least 20 to 25 years in retirement, with the savings to fund their life over that time.

Using the example that you’re 68 years old with $950,000 in an IRA, how can you make sure this portfolio lasts? To a significant degree, it will depend on managing your income. 

First, figure out your Social Security benefits. This income is guaranteed for life, so you can count on it to supplement your retirement portfolio. 

For example, the average retiree received $1,860 per month in Social Security benefits, according to SSA data from Jan. 2024. This comes to $22,320 per year for life, and it will likely continue to grow with federal annual cost-of-living adjustments (COLAs) going forward.

For many households, a sizable percentage of income will come from IRA, 401(k), 403(b) or other retirement portfolio earnings. A popular starting point over the years has been the 4% rule, in which you plan on investing modestly and withdrawing 4% of your portfolio each year for 20+ years in retirement. On a $950,000 IRA, this would generate $38,000 a year of that income. Combined with Social Security, that comes out to a grand total of $60,320 per year, though you again may need to increase that due to inflation.

To address longevity risk, consider weighing your portfolio with income assets. These are assets such as bonds, dividend-stocks and savings accounts, which generate returns without having to sell the underlying asset. While all investments have risk, successful income assets can provide indefinite portfolio income, albeit at a relatively low rate compared to their investment counterparts. 

However annuities, and all other income assets, typically expose your portfolio to inflation risk. Without significant growth, your portfolio will lose purchasing power over time.

To address this risk, it’s often wise to balance your retirement portfolio with some equities and other growth-oriented assets. Typically, a possible way to do this is through mixed-asset funds like an index fund or a mutual fund. These portfolio-based assets can give your retirement account exposure to growth investments, while mitigating the risk involved with selecting equities on a more singular basis. 

If income is one half of managing longevity risk, spending is the other. First look at your tax situation.

With a pre-tax, traditional IRA or 401(k), you will need to pay income taxes on every withdrawal you make. That will reduce your effective rate of income and can also increase your Social Security benefit taxes. You can mitigate this by rolling over your IRA into a Roth IRA, but that would involve sacrificing a significant portion of the account to up-front income taxes. 

If you keep your money in a pre-tax IRA, don’t forget to anticipate required minimum distributions (RMDs). With our example, your $950,000 IRA is the only form of retirement account you have, so it’s unlikely that you will withdraw less than your annual RMD. Once you reach age 73, just make sure to remember that this minimum exists, since the tax penalties for neglecting it can be severe.

Beyond that, consider the lifestyle you want. When it comes to making a retirement account last, much of the issue will be decided by how much you spend. A few key issues include:

• Do you own your own home or rent?
• Do you live in an expensive or inexpensive city?
• Can you comfortably move to extend your savings?
• What kind of luxuries and hobbies do you enjoy?
• Do you have particular medical needs?
• What kind of regular bills do you carry?
• Do you already have long-term care and supplemental health insurance?
• What kind of estate plans do you have?

All of these issues will determine your needs and flexibility in retirement. For example, someone living in a small town will likely find a $950,000 IRA more than enough for a comfortable retirement even with minimal portfolio growth. Someone living in an expensive city, on the other hand, may need to invest for significant gains in order to afford their standard of living.

To make sure your savings last the rest of your life, look at your rate of spending and your projected portfolio income. If this looks like something that can comfortably last well into your 90s, you’ve probably hit the right balance. If not, consider either investing for more growth with a plan for the accompanying risks or finding areas to cut spending.

• 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 up to three 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.
• As a retiree, don’t forget that it’s important to keep investing even in retirement. After all, ideally you will have anywhere from 25 to 30 years to enjoy the returns from your portfolio. Check out SmartAsset’s guide to retirement investing to learn more.

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