Let’s say you’re 65, getting ready to retire, and you’ve saved up $1.5 million. That’s no small feat — congratulations. But now comes the big question: “How much can I actually spend each year without running out of money?”
It’s something almost every retiree worries about. After decades of saving, the idea of seeing your account balance slowly shrink — or worse, vanish too soon — can be nerve-wracking. You’re not alone in this. The good news is that there are proven strategies to help make your money last, and they don’t all require you to be a financial expert.
The 4% Rule: A Simple Starting Point for Retirement Spending
You might’ve heard of the “4% rule.” It’s been around since the 1990s and is still one of the most talked-about guidelines in retirement planning.
Here’s how it works:
- In your first year of retirement, you withdraw 4% of your total retirement savings.
- After that, you adjust that amount each year for inflation.
So, if you have $1.5 million, you’d withdraw $60,000 in the first year. The following year, if inflation is 2%, you’d take out $61,200 — and so on.
The idea came from a study that looked at decades of market data. It showed that retirees who stuck to this rule, with a mix of 50% stocks and 50% bonds, were very unlikely to run out of money over 30 years.
But Does the 4% Rule Still Hold Up in 2025?
That’s the big question, isn’t it?
On paper, the 4% rule seems like a solid strategy. But the world has changed since the ’90s. Markets are more volatile. Inflation has surged. People are living longer. And honestly, managing a retirement portfolio can feel like a second job.
Here’s what you need to think about:
- If the market takes a big dip early in your retirement, that could seriously hurt your long-term plan.
- You’ll have to handle rebalancing your investments every year.
- And let’s face it — the thought of doing all that in your 70s or 80s isn’t exactly appealing for everyone.
So while the 4% rule is a great starting point, it may not be the best fit for every retiree today.
Want Peace of Mind? Consider Guaranteed Income Options
What if you didn’t have to stress about market ups and downs? What if you could get that same $60,000 a year — but it was guaranteed for life, no matter how long you live or what the market does?
That’s where lifetime income products like annuities come in.
With the right annuity, you could use a portion of your $1.5 million to lock in guaranteed monthly income for the rest of your life. And in some cases, you might not even need to use the full $1.5 million to generate that $60,000 a year — depending on your age, health, and how the product is structured.
Why retirees like this option:
- You don’t have to manage or rebalance anything.
- The income is steady and predictable.
- You won’t outlive your money, no matter how long you live.
Everyone Spends (and Worries) Differently
Retirement isn’t one-size-fits-all. Some people love managing their investments and watching the markets. Others just want to know their bills are paid and their lifestyle is covered.
So, when you’re deciding how to spend your $1.5 million, think beyond the numbers:
- What kind of lifestyle do you want?
- How comfortable are you with financial risk?
- Would a guaranteed monthly check help you sleep better at night?
The right choice is the one that helps you feel confident and in control — not what someone else says is the smartest.
A Quick Comparison: Your Options with $1.5 Million
| Approach | Annual Income | Risk | Effort |
|---|---|---|---|
| 4% Rule | ~$60,000 | Moderate to High | Requires active management |
| Annuity/Guaranteed Income | ~$60,000 (varies) | Very Low | Set-it-and-forget-it |
| Hybrid | Combines both | Balanced | Moderate oversight |
Final Thoughts: Build the Plan That Works for You
Retiring with $1.5 million puts you in a strong position — but how you use that money matters just as much as how you saved it.
The 4% rule is a helpful benchmark, especially if you enjoy staying hands-on with your finances. But if you’d rather not worry about markets and money in your later years, guaranteed income solutions could be worth a closer look.
And if you’re somewhere in between? That’s okay too. Many retirees choose a mix — using part of their savings for steady income and leaving the rest invested for growth.
Whatever you choose, the most important thing is to have a plan that aligns with your goals, your lifestyle, and your peace of mind.
FAQs
1. Can I live on $60,000 a year in retirement?
Yes, many retirees do — especially in states with a lower cost of living. If your mortgage is paid off, it’s even more manageable.
2. Is the 4% rule still reliable in 2025?
It’s a good starting point, but some experts suggest using a slightly lower rate (like 3.5%) to be safe in today’s environment.
3. What if I live past 95?
That’s why guaranteed income products are so valuable — they don’t run out, even if you live to 100.
4. Do annuities come with fees or downsides?
Yes, some do. Always read the fine print and work with a trusted financial advisor before committing.
5. Should I use all my savings for guaranteed income?
Not necessarily. Many people use a partial allocation, keeping some money flexible for emergencies or growth.
Helpful Links
- Max Out Retirement Savings: Cash Balance Pension Retirement Plan Contribution Limits Explained
- Capital Gains Tax Explained: How to Reduce Your Tax Burden
- 401(k), IRA, and Roth IRA: Which Retirement Plan Is Best?
