Tips for Making $1.7 Million Last in Retirement

Retiring with $1.7 million in savings puts you ahead of many people. However, making sure that nest egg provides lasting income through your golden years takes careful planning. Here are some tips to help make $1.7 million last in retirement:

Determine Your Retirement Budget

First, estimate your annual retirement spending needs. Track your current living expenses, and then identify costs that may decrease (commuting, mortgage) or increase (healthcare, travel) in retirement. Build in a cushion for unexpected expenses. This will determine how much retirement income you need to generate from your $1.7 million.

Follow the 4% Rule

A common guideline is to withdraw 4% of your retirement savings each year. At that rate, $1.7 million would provide $68,000 of annual income. You can adjust withdrawals based on market performance. This initial benchmark helps ensure you don’t deplete your savings too quickly.

Claim Social Security Optimally

Delay claiming Social Security until age 70 to maximize your benefit amount. This can provide an additional $1,000+ in monthly lifetime income. Coordinate this with your other retirement income sources.

Create an Income Floor

Use a portion of your savings to generate guaranteed income that covers fixed expenses. Annuities and bonds provide a steady income floor. This protects against stock market volatility wiping out your nest egg.

Maintain a Cash Cushion

Keep 1-2 years of living expenses in cash accounts or short-term CDs. This gives you withdrawals to live on if the market is down without having to sell equities at a loss. Replenish the cash when markets recover.

Invest the Rest for Growth

Remaining assets should remain invested in stocks (domestic and international) for continued growth. Rebalance periodically. These funds can provide income via dividends and selective sales of appreciated securities.

Implement a Drawdown Strategy

Coordinate your Social Security, guaranteed income sources, dividends, and systematic withdrawals from invested assets to generate retirement income. Adjust withdrawals based on market performance and life events.

Consider Downsizing

Selling a large home in favor of lower cost senior or shared housing can free up equity. This reduces expenses and mortgage/insurance costs. The proceeds can bolster retirement savings.

Relocate Somewhere Affordable

Moving to a lower cost of living area stretches your dollar further. Make sure to factor in relocation costs. Cheaper areas often align with more favorable tax environments too.

Review Expenses Regularly

Reevaluate your budget annually. Look for areas to reduce spending and optimize your withdrawal strategy. Traveling less or downsizing vehicles are common ways to cut costs in retirement if needed.

Retiring with $1.7 million gives you an advantage, but living off investment assets requires planning. Work with a financial advisor to develop an income strategy tailored to your situation. The key is creating a sustainable withdrawal approach that balances growth, income, and risk management.