I’m 60 With $1.2 Million in a Roth IRA. How Do I Make Sure This Money Lasts the Rest of My Life?

Planning for a Roth IRA is a little different than with most other retirement assets. This tax-advantaged account generates entirely untaxed income, as long as effectively boosting the value of your withdrawals and your Social Security benefits.

That changes your options compared to having a pre-tax 401(k) or other non-Roth account.

For example, say that you have $1.2 million in a Roth IRA at age 60. The good news here is that, overall, you’re in a pretty good position. You probably don’t need to do much to make sure this portfolio generates a comfortable income in retirement, but it all depends on your personal circumstances.

Retirement income for most households is a balance of portfolio earnings and Social Security.

First, Social Security. Without knowing more, let’s assume average benefits, which in 2024 come to $22,884 per year ($1,907 per month). Since the rest of your income comes from a Roth account, you will only calculate taxes based on those benefits. Taxes on these benefits will depend on how much other income you have, but you can expect 0%, 50% or 85% of your benefits to be taxed.

From there, we can look at your Roth IRA.

Most of your portfolio income will depend on your personal investment and retirement situation. For example, let’s say that you plan on retiring at full retirement age of 67. This gives you seven more years of portfolio growth for an already-solid Roth portfolio. How much you hold in this portfolio at retirement (and, as a result, your total income) will depend a lot on your investment choices and risk tolerance.

For example, let’s say that for the next 7 years you continue to contribute 10% of a median U.S. income ($7,500 per year in contributions). Based on your investment choices and rates of return your portfolio might grow to:

• S&P 500 Average (10%, High volatility) – $2.4 million by age 67
• Balanced Portfolio Average (8%, Moderate volatility) – $2.12 million by age 67
• Corporate Bond Average (6%, Low volatility) – $1.86 million by age 67
• 10-Year Treasury Bond Current (4.63%, Lowest volatility) – $1.7 million by age 67

At a 4% withdrawal rate, starting at age 67, each of these portfolios could yield an annual combined (portfolio and Social Security) income of:

• S&P 500 – $118,884
• Balanced – $107,684
• Corporate Bonds – $97,284
• Treasury Bonds – $90,884

Or, alternatively, you could invest in an annuity. Say that you put your entire $1.2 million Roth IRA in an annuity right now, with a payout date seven years in the future. A representative lifetime annuity might yield $137,856, with a combined income of $160,740. While higher than any of your other options, unlike portfolio income your annuity payments likely will not adjust for inflation.

From there, the good news is that we can stop the analysis. Since this is a Roth IRA, your income will be entirely post-tax. So we can assume this income is complete as-is. What’s more, you will not have to plan for RMDs or other tax-related issues. In other words, these are the numbers you have to work with.

In all cases, even at a 4.63% Treasury bond rate, by age 67 your portfolio can yield an income significantly above the median. In fact, depending on your investment strategies during retirement, you may be able to collect even more than our assumed incomes.

However, the question is whether this portfolio can generate enough money to last for the rest of your life, not the median life. That depends entirely on your personal expenses, which means budgeting for your spending. Among other issues, consider:

• Housing Expenses: Do you own your own home or rent? If you own, what does it cost to maintain, insure and otherwise keep up your house? If you rent, what kind of increases should you expect?
• Medical Expenses: Medical and insurance expenses are particularly high in retirement. Make sure you budget for out-of-pocket spending, gap insurance, long term care insurance and other needs.
• Lifestyle Expenses: Do you like to travel? What kind of hobbies do you have? Do you eat out? In general, what kind of lifestyle do you enjoy and what does that cost to maintain?
• Estate Expenses: Do you have any specific estate wishes for (hopefully much) later? What would you like to leave behind, and what kind of assets will it require?
• Basic Expenses: Finally, what are your basic bills? In other words, in addition to housing, what is your bottom line for each month?  

All of these issues are specific to your personal situation. They’re also dispositive. Whether your portfolio can last the rest of your life will depend as much on your budget as your income. As long as you can build a long-term Roth portfolio that beats your spending, it will last. For a median household, your combined income should be more than sufficient. For your household, that depends on you.

Finally, retirement brings its own set of risks and issues to keep an eye out for. Among others, keep an eye out for these three specific issues:

For retirees, inflation is a biggie. Even at the Federal Reserve’s target 2% rate, prices double roughly every 30 to 35 years. This can fluctuate significantly, and almost entirely unpredictably. So it’s important to prepare for this. This is even more important if you live in a city, and absolutely urgent if you rent, as those circumstances generate much higher-than-average inflation.

Social Security benefits receive an annual inflation-adjustment. Your portfolio is another thing. Make sure to invest appropriately, trying to achieve at least enough growth to keep pace with inflation. That’s particularly appropriate if you invest in high-security assets like bonds and annuities, which have low or no rates of growth.

Sequence risk is when you have to sell assets during a down market. For retirees, this is a danger. If the market declines, but you depend on selling assets for income, you can be forced to choose between taking a loss or cutting your income.

This can be managed with good financial planning and the right investments but you will need to plan ahead. Don’t discount sequence risk, otherwise it can cost you.

Health issues in retirement can take any number of forms. As noted above, make sure to plan for additional costs in retirement, as your medical needs will generally grow as you age. 

You should also make sure to plan for more significant medical needs such as in-home care, residential care and mental decline. This can be managed through planning such as proper insurance and living wills, and it’s important to do so.

By letting you collect untaxed money, a Roth IRA effectively increases your retirement income, potentially by quite a lot. With $1.2 million in their Roth portfolio by age 60, a household would be in a good position for a comfortable retirement ahead.

• Health is often one of the biggest cost-surprises for retirees. Between costs of care and costs of insurance, medical issues can involve a lot of new spending that you may not have entirely prepared for. So let’s start preparing for that right now. 
• 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.

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