SmartAsset and Yahoo Finance LLC may earn commissions or income through links in the content below.
To ensure that your retirement savings last the rest of your life, it is often necessary to balance income with expenses over your projected lifespan. But let’s say you have $900,000 in an IRA. You’ll also want to consider whether you want to leave a financial legacy. And since all long-term forecasts are subject to change, risk management would be necessary, possibly using insurance policies and portfolio diversification.
Here’s a look at how a 75-year-old with almost $1 million in savings might approach planning for income and expenses for the rest of their life. Whether you are a retirement planner on your own or need someone to guide you through every step of the process, a financial advisor can provide you with valuable information.
Income, Expenses and Longevity
Your savings will likely last you the rest of your life if the amount of money you spend doesn’t exceed the amount of income your portfolio generates. With that in mind, figuring out how to stretch a specific amount of money over an indefinite period of time depends primarily on coming up with realistic projections of your expenses and income while taking into account circumstances that are difficult to foresee.
One key piece of information that is especially difficult to predict is how long a retiree is likely to live. The Social Security Administration’s life expectancy calculator indicates that a man who is 75 years old today can expect to live to age 87, while a woman of the same age can expect to live almost to 89. Of course, your individual life expectancy may vary depending on whether you smoke, exercise, maintain a healthy weight, or have existing medical conditions, among other factors.
The task of calculating whether your savings will last is further complicated by the possibility of unexpected events that can range from prolonged market booms or busts to the need for expensive long-term care. However, if you use conservative projections and create a cushion, you can potentially create a workable budget that will allow you to live comfortably for the rest of your life without depleting your savings. But if you need help creating a retirement income plan and/or budget, consider contacting a financial advisor.
Income forecast
A financial advisor meets with two 70-year-old clients.
To get started with retirement income, as a shortcut you can use the 4% rule to estimate a safe withdrawal rate. This guideline suggests withdrawing 4% of your portfolio in your first year of retirement and then adjusting your subsequent withdrawals for inflation each year so that your savings last 30 years.
But the 4% rule isn’t one-size-fits-all. It’s quite conservative, and withdrawing $36,000 from a $900,000 IRA may not be enough to meet the needs of a 75-year-old retiree. As a static approach, it also does not take into account how a retiree’s expenses and spending needs may change.
For a little more income and a lot more security, the retiree could invest the $900,000 in 30-year U.S. Treasury bonds, which currently pay 4.25%. That would generate stable income, but bond yields may lag inflation, ultimately reducing purchasing power.
At the other end of the risk-reward spectrum, stocks promise higher returns but with more risk. The S&P 500 Index, for example, has returned nearly 10% annually on average for decades. However, you probably can’t count on $90,000 a year from a stock market investment because market fluctuations, fees, and other influences reduce actual returns over time. Investing exclusively in stocks can also expose a retiree to an excessive level of risk and volatility.
Other assets to consider for a retirement portfolio may include annuities, dividend stocks, corporate and tax-exempt bonds, and alternative investments such as real estate. These offer varying degrees of risk and reward. Combining them to create a diversified portfolio can produce more consistent and reliable returns over the long term.
Suppose the retiree built a diversified portfolio that averaged a 7% annual rate of return. If they withdrew 7% of their portfolio at age 75, that would give them $63,000 before taxes. They could then adjust their withdrawals for inflation (between 2% and 3%) each year after that. While your savings probably won’t last 30 years given the higher withdrawal rate, it probably isn’t necessary, considering your current age and life expectancy.
Additionally, most retirees can expect Social Security benefits. Depending on your earnings history and when you claim benefits, you can collect up to $61,296 in 2024. However, that is the maximum payment. A report from the Social Security Administration showed that Old-Age and Survivors Insurance benefits paid to retired workers averaged $1,976 monthly or $23,712 per year in January 2025.
Adding the average Social Security benefit of $23,712 to the $63,000 in portfolio withdrawals produces a hypothetical retirement income of almost $87,000 at age 75. While this is a rough estimate using a hypothetical scenario, a financial advisor can help you more accurately estimate what your retirement income could be based on your income sources and your Social Security income history.
Expense estimate
Like retirement income, spending can vary wildly. But averages can be useful here too. The Employee Benefits Retirement Institute reported in a survey of retiree spending that categories of retiree spending broke down as follows:
Expense Category
Percentage
Accommodation
30%
Food
26%
Transport
11%
Entertainment
8%
medical insurance
8%
Other expenses
6%
Clothes
6%
Out-of-pocket medical costs
5%
Please note that this budget division does not include any tax outlays. While many retirees pay less income taxes than when they worked, taxes play an important role in planning for retirement income.
Remember, up to 85% of your Social Security benefits are taxable depending on how much “combined income” you have. You can calculate this figure by dividing your profit in half and adding it to your adjusted gross income (AGI) plus any tax-exempt interest income you may have. If your combined income as an individual exceeds $25,000 ($32,000 if you are married filing jointly), you will pay taxes on up to 50% of your benefits. If it’s more than $34,000 ($44,000 if married filing jointly), up to 85% will be taxable.
Meanwhile, withdrawals from your IRA will be subject to income tax rates. Fortunately, some financial advisors can help you account for taxes in your retirement plan.
Risk management
A 75-year-old retiree hugs her dog during an afternoon walk.
Any practical long-term forecast considers risk. You can manage portfolio risk by diversifying across different asset classes. Insurance provides another way to protect assets and protect them against unexpected expenses. These are the main types of insurance to consider:
Some coverage may not be relevant or necessary. For example, a 75-year-old person likely has Medicare and does not need private health insurance, although they may choose to pay for supplemental coverage. Likewise, if you rent your home, you won’t need homeowner’s coverage and a less expensive renters insurance policy may be sufficient. Whether you’re retired or in your prime earning years, a financial advisor can help you integrate insurance and other risk mitigation strategies into a comprehensive financial plan.
Conclusion
In theory, it is entirely possible for a 75-year-old to tap into $900,000 in savings for the rest of their life. Whether it’s enough for you depends on a number of factors, including your retirement expenses and your risk appetite as an investor. You may be able to reduce expenses by moving to a less expensive location or increase your investment profits by carefully diversifying your portfolio. You may also want to consider protecting your assets and income against loss with appropriate insurance and risk management strategies.
Retirement Planning Tips
Ask a financial advisor for information on how you can make your retirement savings last. SmartAsset’s free tool connects you with vetted financial advisors serving your area, and you can take 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 you achieve your financial goals, get started now.
SmartAsset’s retirement calculator can not only help you estimate how much money you’ll need to support your projected expenses in retirement, but it can also project whether you’re on track to meet that savings goal.
Keep an emergency fund on hand in case you have unexpected expenses. An emergency fund should be liquid, in an account that is not at risk of significant fluctuations like the stock market. The downside is that inflation can erode the value of liquid cash. But a high-interest account allows you to earn compound interest. Compare savings accounts at these banks.
Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with potential clients and offers marketing automation solutions so you can spend more time converting. Learn more about SmartAsset AMP.
The post I am 75 years old and have $900,000 in an IRA. How do I make sure this money lasts me the rest of my life? appeared first on SmartReads by SmartAsset.
