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Retiring at 60 With $1 Million: What to Expect

By Justin Pritchard, CFP®

Your comfort in retirement depends on several factors. For example, the amount you have saved, any income sources, and your age are all important.

The younger you are when you retire, the more years you need to fund. Plus, you might not be eligible for retirement benefits (like Social Security) until you reach a certain age. So, can you retire at 60 with $1 million, and what would that look like?

It’s certainly possible to retire comfortably in this scenario. That said, it’s wise to review your spending needs, taxes, health care, and other factors as you prepare for your retirement years.

On this page:

  • Is $1 million enough? You’re doing relatively well.
  • You’ll pay some taxes. That’s a nice problem to have, and there might be opportunities.
  • Prepare for RMDs. It might make sense to take income early.
  • How much can you spend? Go beyond withdrawal rates and rules of thumb.
  • What about health care? You have a few years before Medicare.

Many of my clients are in a similar boat. They’re around 60 years old with $1 or $2 million (sometimes more, sometimes less) at retirement. When we make a plan, there’s often a decent chance of success.

Is $1 Million Enough at Age 60?

The only honest answer to financial questions like this is: “It depends.” But you may appreciate knowing that you’re better off than most people in the U.S. if you have $1 million saved for retirement by the time you’re 60 years old.

Many people retire with less, but they might not have the same expenses or needs you have. For example, they might live someplace inexpensive, have excellent health, or otherwise keep costs low.

Continue reading below, or watch this video with similar information:


Results from the Federal Reserve’s Survey of Consumer Finances tell us that most people don’t have a $1 million nest egg.

Retirement Savings by Age
Age RangeAverageMedian
55 to 64$408,420$134,000
65 to 74$426,070$164,000

Why is this important? Because you have more than the average person, you may need to plan for taxes and “means testing” during retirement. Plus, it might just be interesting.

You’ll Pay Some Taxes

If you have $1 million in assets, it may make sense to do some tax planning as you approach retirement. That’s because you have enough assets to complicate two things:

  1. Social Security retirement benefits
  2. Required minimum distributions (RMDs)

Taxes on Social Security

It’s likely that you’ll pay taxes on some portion of your Social Security benefits because of your savings. That’s because withdrawals from pre-tax retirement accounts—such as an IRA, 401(k), or 403(b)—typically add to your taxable income. When that happens, the IRS includes some of your Social Security income in your taxable income, as well.

Note that if your only source of income is Social Security, you generally don’t owe taxes on that income. Also, withdrawals from Roth-type accounts can help you avoid paying taxes on Social Security.

But in your case, with roughly $1 million in assets, there’s a decent chance that you have money in pre-tax accounts. And you’ll eventually spend that money.

Up to 85% of your Social Security benefit may be taxable. It’s important to know that for two reasons:

  1. You want to budget for that tax expense (you can’t necessarily spend 100% of your income).
  2. You may have opportunities to reduce the tax impact.

So, how can you reduce the taxes you pay on Social Security benefits? With some strategies, you can manage how much taxable income shows up on your tax return—or at least partially control the timing. If all goes well, you can minimize the tax impact (possibly paying tax on only 50% of your benefit, or even none of it).

That said, don’t necessarily expect to get all of your Social Security income tax-free. It may be possible to accomplish, but the cost to make it happen might or might not be worth it.

There are at least a few ways to manage taxes on Social Security. Some of these strategies could make sense, but some might not be feasible, and you need to evaluate them carefully with financial experts. A few examples include:

  1. Use Roth accounts for savings during your working years.
  2. Convert pre-tax assets to Roth-type money by paying taxes earlier than is necessary.
  3. Explore giving money directly to charity if you’re eligible to make Qualified Charitable Distributions (QCDs).
  4. Evaluate QLACs (which I don’t sell) if you want to postpone RMDs.
  5. Other strategies

Ultimately, the idea is to selectively take income when it makes the most sense.

Prepare for RMDs

When you reach age 72, the IRS requires you to take withdrawals from certain pre-tax retirement accounts. That money has presumably never been taxed before, so these RMDs generate taxable income.

Unfortunately, large RMDs can cause your income to jump substantially, putting you into a relatively high tax bracket. RMDs are often taxed as ordinary income (unless they are from Roth-type accounts and qualify for tax-free treatment), which can increase the taxable income on your return.

Again, this may be a nice problem to have—it means you’ve saved enough money to generate a sizable RMD. But you’re not powerless in the face of large distributions. Instead, you can proactively take withdrawals from pre-tax accounts in low-income years. For instance, when you stop working, you likely have a lower income than in your highest-earning years. That may be an excellent time to take distributions strategically.

How much should you take? It depends on several factors. For example, you might want to “fill” a low tax bracket. But if you don’t need the money for spending, it’s also worth exploring Roth conversions so that any future growth can potentially come out of your accounts tax-free. By reviewing your income annually, you may be able to determine a reasonable amount to withdraw.

Other strategies, including QLACs and QCDs, could also help you manage the impact of RMDs.

How Much Can You Spend With $1 Million Saved?

Is $1 million enough money for you to retire at 60? It depends on things like your spending needs, location, health, household, and other factors. For many people, $1 million is a sufficient nest egg. But running some numbers can provide clarity.

There are several ways to estimate how much you can spend with $1 million in savings. The best option is to do a detailed analysis, preferably with dedicated financial planning tools. Those programs can estimate taxes, inflation, investment results, what-if scenarios, and more. But quick calculations can also provide insight and ballpark figures.

Example of Retirement at 60 With $1 Million

Assume the following:

  • You’re 59 now
  • You have $950,000 saved for retirement
  • The market doesn’t crash next year
  • You’re retiring at 60
  • You want $70,000 per year of pre-tax income
  • You get $30,000 of pension income at retirement

In that case, it might be reasonable to retire. But there are many unknowns, and you could still run out of money. For example, if markets misbehave, inflation derails your plans, or you face long-term care (LTC) expenses, the plan might not work. How long will you live? Do you have equity in your home as a backup? There are numerous other considerations that deserve careful attention.

The assumptions above should appear in the calculator below. Play with the numbers to run some customized what-if scenarios and make the plan more resilient.

Calculator Sample: Can I Retire at 60 With $1 Million?

Withdrawal Rates

Some people like to use withdrawal rates to estimate how much they can spend from their savings. The so-called “4% Rule” is probably the most popular (and controversial) rule of thumb. However, it’s really a research finding—not a rule that professionals recommend you follow.

The 4% withdrawal rate resulted from research on how much you can “safely” withdraw in retirement (safely is in quotes because there are no guarantees in life, and you can always run out of money). Under that research, Bill Bengen found that your money would have lasted 30 years over the historical worst-case scenarios if you withdrew 4% of your starting balance.

Example:

  1. Start with $1 million of savings at retirement.
  2. Assume a diversified portfolio, originally 50% stocks and 50% bonds (although more diversification might improve your chances).
  3. Expect a 30-year time horizon.
  4. Withdraw 4% of $1 million in Year 1 (or $40,000).
  5. Adjust that number for inflation in future years (if inflation was 3%, you’d add 3% of $40,000).
  6. In Year 2, you might withdraw $41,200, given the assumptions above.
  7. Repeat the inflation adjustment indefinitely.

Again, the research looked at worst-case scenarios. So, in many cases, you could withdraw more than 4% and succeed.

Now, there is passionate debate about the 4% rule. Some say that the number is too high and that you can’t expect it to work in current and future environments. Others argue that the study still has value, and worst-case scenarios don’t happen all the time.

All that said, it’s an oversimplified way of looking at things. Again, I don’t know of anybody who actually uses the rule. Instead, I see clients withdraw from their savings at varying rates. In some years, they withdraw at high rates, and then things typically slow down. Plus, it might not make sense (or be realistic) to take straight-line inflation adjustments every year.

For example, consider the case of somebody delaying Social Security until age 70. You might do this for a variety of reasons:

  • To maximize your monthly income.
  • To provide the largest survivor benefit for a spouse.
  • To “leave room” and keep your income low during years when you do Roth conversions.

Before you reach age 70 and turn on your income, you’ll withdraw at a relatively high rate. But that might be okay—assuming you have a decent plan in place and it works out.

Plan for Health Care

As an “early retiree,” you may need to do some extra planning regarding your health coverage. Retiring at 60 means you likely have five years to go until you’re eligible for Medicare. At that point, health care is fairly straightforward, although you’ll want to evaluate supplemental coverage and stay on top of any changes.

Before age 65, you have several options, including:

  • Buy your own coverage through a Marketplace or Exchange.
  • Continue your job’s coverage with COBRA or state programs for up to 18 months.
  • Switch to a spouse’s plan, if that’s an option.
  • Get retiree health care from your former employer, if available (and if it’s competitive).

All of your choices have pros and cons. Ultimately, it’s wise to explore all of the options and decide what’s best. Even if your job offers retiree coverage, it might not be your best option, so shop around.

Given the Affordable Care Act (ACA) and related subsidies, buying insurance through a Marketplace or Exchange could be appealing. If your income is low enough, you might qualify for tax credits that keep your costs relatively low. However, there’s always a tradeoff: If you try to minimize your income to get low premiums, that approach conflicts with strategies like Roth conversions.

Still, it may be possible to get surprisingly low premiums for health coverage. That could make sense for a few years, especially when you’re in your 60s and coverage can get expensive. You might be able to draw from pre-tax accounts later, after 65, if needed. But it’s critical to be mindful of your Medicare premiums—if you take too much income after age 63, you could bump up your premiums due to IRMAA.

Ultimately, all of these moving pieces work together, and it’s essential to have a big-picture view. For example, your health insurance decisions can affect your taxes, and vice versa.