How Long Will a Million-Dollar IRA Last?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Using the 4% Rule

The 4% rule is a common guideline for retirement spending. It suggests you can withdraw 4% of your retirement savings in the first year and adjust that amount for inflation each year. For a million-dollar IRA, this means:

First Year Withdrawal: 4% of $1,000,000 = $40,000.

Subsequent Years: Adjusted for inflation.

If the IRA continues earning an average annual return (after inflation), this approach could allow the money to last for 30 years or more. However, market volatility and varying returns can affect longevity.

Compared with an Annuity with GLWB (5% to 7% Withdrawal Rate)

An annuity with a Guaranteed Lifetime Withdrawal Benefit (GLWB) offers a different approach. It provides a guaranteed income for life, with withdrawal rates typically between 5% and 7%. Assuming a 5% to 7% withdrawal rate on a million-dollar IRA:

At 5% Withdrawal Rate: $50,000 per year.

At 7% Withdrawal Rate: $70,000 per year.

The key advantage of GLWB is the guarantee of income for life, regardless of market conditions, potentially offering more stability than the 4% rule.

How Long Will A Million Dollar Ira Last In Retirement

Advising IRA Rollover to IRA Annuity with GLWB

Considering these factors, rolling over the IRA to an IRA annuity with GLWB can be beneficial for automating the withdrawal process and ensuring a steady income stream. This move can provide peace of mind, particularly if you’re concerned about outliving your savings. However, it’s crucial to consider factors such as fees, the financial strength of the annuity provider, and your individual financial situation before making a decision.

Comparing 4% Rule and GLWB Annuity

Aspect4% RuleGLWB Annuity (5-7% Rate)
Initial Withdrawal$40,000$50,000 – $70,000
Subsequent AdjustmentsAnnual inflation adjustmentFixed percentage
Longevity RiskSubject to market risksGuaranteed for life
FlexibilityMore control over investmentsLess flexibility, fixed terms
SuitabilityThose comfortable with market riskThose seeking income certainty

Conclusion

Deciding between the 4% rule and an annuity with GLWB depends on your risk tolerance, desire for guaranteed income, and individual retirement goals. An IRA annuity with GLWB provides a structured, worry-free approach to retirement income, ensuring you don’t run out of money. It’s advisable to consult with a financial advisor to tailor this decision to your specific needs. Contact us today for a free quote.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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