We’re in Our Early 60s with $1.4 Million in Investments. Can We Afford to Withdraw $90k Per Year in Retirement?

There are going to be many factors that help you determine if you’re ready to retire to $90k per year for as long as you’ll need it. Withdrawing too much too soon heightens the danger of depletion, so determining a safe and sustainable withdrawal rate in retirement is crucial to ensure savings last your lifetime. But portfolio allocation and retirement timing can also have a large impact on the outcome. Also vital: Accounting for inflation and healthcare costs, avoiding overspending from lifestyle inflation and managing required minimum distributions.

A financial advisor can analyze your full financial picture to develop a personalized withdrawal and investing approach that balances income with longevity.

Setting an appropriate withdrawal rate is an essential part of planning a secure retirement. The widely followed 4% rule suggests retirees can safely take out 4% of a conservatively allocated portfolio the first year, adjusting upward for inflation annually, with minimal risk of depletion over a 30-year timeline.

Withdrawing substantially more than 4% increases risk. This is especially true early in retirement due to sequence of returns risk, which can happen when poor market conditions develop just as retirees begin distributions. This phenomenon, which is not uncommon, forces you to sell more shares in order to maintain income levels. This can drastically accelerate shrinkage of your principal and similarly drastically reduce the time your savings will last.

A couple in their early 60s considering withdrawing $90,000 annually from retirement savings of $1.4 million is, according to conventional wisdom, flirting with excessive risk. This annual withdrawal equates to a 6.4% initial withdrawal rate, substantially above the 4% guideline.

A 2023 Morningstar analysis of withdrawal rates found that a similar withdrawal rate of 6.2% had only a 50% chance of allowing even an aggressively invested all-stock portfolio to last for 30 years. The same analysis found that a 4% withdrawal rate and a more conservative asset allocation of 40% stocks boosted the 30-year sustainability odds to 90%.

When you use lower initial withdrawal rates in the beginning, you help your savings last longer by using the power of compounding. Once the impact of taxes and any market underperformance gets factored in, even withdrawal rates just slightly above 4% can present sustainability issues over decades.

There is more to funding a secure retirement than following a one-size-fits-all withdrawal rate benchmark. Customizing a retirement withdrawal strategy requires weighing many variables from tax efficiency to healthcare costs. General principles to follow for conservative withdrawal rates include the following:

• Assess your planned retirement living expenses and make sure they are not excessive. This is especially important if your expenses appear likely to exceed a safe withdrawal rate. A figure of approximately 75% of your pre-retirement income is a typical guideline here.
• If expense budget and planned income don’t match up, consider delaying retirement. This lets you accumulate more in savings and can boost your safe withdrawal figure.
• Invest for the long term, rebalancing periodically to limit volatility and sequence risk.
• Deferring Social Security until age 70 is another fix to consider. Doing this maximizes your monthly benefits and provides inflation protection.
• Think about covering your expenses until you start claiming Social Security benefits with the help of larger withdrawals from traditional IRAs and 401(k)s. One benefit of this is that it can reduce the size of the required minimum distributions (RMDs) you have to take after age 73. And that can reduce the taxes you’ll have to pay in the later years of retirement.
• Look at relocating to income tax-friendly states.
• Diversify income streams. Weigh annuities, target-date funds, dividend stocks and Treasury Inflation-Protected Securities as alternatives to a conventional portfolio of equities and fixed-income securities  
• Account for healthcare costs. Health Savings Accounts can address risks of hard-to-handle medical bills before Medicare eligibility starts at age 65. At the other end of retirement, when you may need an expensive nursing home, long-term care insurance may prove vital. One helpful long-term care insurance option, called a joint policy, lets either partner in a couple use all the benefits.

Throughout, you will want to avoid overspending due to lifestyle inflation. If you keep your budget flexible, you can reduce withdrawals as markets and prices shift. Consider matching with a financial advisor for free to discuss your financial situation.

Withdrawing $90,000 from a $1.4 million could work, but it’s too risky for many retirement savers and planners. A more conservative withdrawal rate is likely preferable. Building income diversity through delayed Social Security and reduced spending also improves odds for success. With budget flexibility and a balanced investing approach, your retirement savings can maintain income for your lifetime.

• If you’re considering withdrawing more than the commonly accepted safe standard, connect with a financial advisor to develop a personalized plan with guidance on an appropriate, sustainable withdrawal strategy. SmartAsset’s free 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.
• When you have questions about how much to save for retirement, SmartAsset’s retirement calculator has answers.

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