Retiring at 65 with $940k IRA and $2,200 Monthly Social Security: A Financial Checkup

As you approach retirement age, it's essential to assess your financial situation to ensure a comfortable and secure retirement. With $940,000 in an IRA and $2,200 in monthly Social Security benefits, you're well on your way to a comfortable retirement. However, let's conduct a thorough financial checkup to ensure you're on track to retire at 65.



1. Income and Expenses

First, calculate your total annual income from your IRA and Social Security benefits. In your case, that would be:

* IRA: $940,000 / 30 years = $31,333 per year (assuming a 7% annual return)
* Social Security: $2,200 x 12 months = $26,400 per year

Total annual income: $31,333 + $26,400 = $57,733

Next, estimate your annual expenses in retirement. This will vary depending on your lifestyle, location, and other factors. A common rule of thumb is to estimate expenses at 70-80% of your pre-retirement expenses. For this example, let's assume your annual expenses will be $40,000.



2. Withdrawal Rate

To determine if you can retire at 65, you need to calculate your withdrawal rate – the percentage of your portfolio you'll withdraw each year to cover your expenses. Using the 4% rule, a widely accepted guideline for retirement withdrawals, you can estimate your sustainable withdrawal rate:

* $40,000 (annual expenses) / $940,000 (IRA balance) = 4.26%

This withdrawal rate is slightly higher than the 4% rule, but it's still within a reasonable range for a 30-year retirement period.

3. Inflation and Longevity Risk

Consider the impact of inflation on your purchasing power and the risk of outliving your savings. To account for inflation, you can adjust your withdrawal rate annually or invest a portion of your portfolio in inflation-protected assets, such as Treasury Inflation-Protected Securities (TIPS).

To mitigate longevity risk, consider annuities or other income-generating investments that provide a steady stream of income throughout your retirement.

4. Taxes

Don't forget to factor in taxes when planning your retirement income. Depending on your tax bracket and the tax laws in effect when you retire, you may need to withdraw more from your IRA to cover taxes on your Social Security benefits and other income sources.



In conclusion, with a well-diversified portfolio, a reasonable withdrawal rate, and a solid understanding of your income and expenses, you can retire at 65 with confidence. Regularly review and adjust your financial plan to account for changes in your life, the economy, and tax laws. By doing so, you'll be well on your way to enjoying a comfortable and secure retirement.