Personal Finance

I'm 66 and Collecting $3,000 a Month in Social Security. Should I Wait to Start Tapping My $1 Million IRA?

Maurie Backman

Published: December 7, 2024 12:24 pm

The average retired worker on Social Security today collects about $1,924 per month. If you’re getting $3,000 a month from Social Security, you’re ahead of the game in that regard. And while you may be able to get by on your monthly benefits alone, if you have $1 million in savings at your disposal, taking withdrawals could help you enjoy a more comfortable lifestyle.

Key Points from 24/7 Wall St.

• The longer you let your IRA grow, the more you savings you can accumulate.
• If you can get by comfortably on Social Security, you might as well wait to tap your savings.
• But don’t just consider your budget — consider your retirement goals and personal satisfaction, too.

That said, the longer you’re able to leave your IRA alone, the more tax-advantaged growth you get to enjoy. And if you’re managing okay on Social Security, you may be inclined to sit tight on taking IRA withdrawals until you’re forced to in the form of required minimum distributions.

If you ask most financial experts, they’ll probably tell you that if you can afford to leave a $1 million IRA alone a bit longer, do it. But there’s more to the story than that.

How are you enjoying your lifestyle?

It’s conceivable that a $3,000 monthly Social Security check is enough to cover your monthly bills, especially if your home is paid off, you don’t have much or any debt, and you live fairly modestly.

But if you’re getting $3,000 a month from Social Security at age 66 (which means you didn’t delay your claim for a boosted benefit), you were likely a higher earner throughout your career. And because of that, you may be accustomed to a certain lifestyle — one that requires more than $3,000 a month to uphold.

Now a $1 million nest egg needs to be managed carefully. You don’t want that money to run out.

But if you use the 4% rule to manage your savings, you’re looking at roughly $40,000 per year, or $3,333 per month, on top of your Social Security income. That could enhance your lifestyle in a very big way. Even half of that amount could, and it wouldn’t be a reckless thing at all to withdraw from a $1 million IRA at a rate of 2% starting at age 66.

So if you’re comfortable on your $3,000 a month from Social Security, then sure, leave your IRA intact and let it keep growing. Otherwise, there’s no need to wait to start tapping it to some degree.

Are you putting off your retirement goals?

Nobody knows what the future holds. You may be inclined to leave your IRA alone as long as you can. But if a big part of your retirement plan includes travel and other activities that could become harder as you age, then that’s another good reason to start withdrawing funds from your IRA now.

A $3,000 monthly Social Security check may be enough to keep the lights on and put food on the table. But it’s probably not enough to take the trips you’ve always wanted to different parts of the world.

If you’re sitting on a $1 million IRA, it means you worked hard and saved well your entire life. You deserve to use at least some of that money to do the things you’ve always dreamed of.