How to Make Your $1,000,000 Retirement Fund Work for You: Expert Moves

You’ve been saving for retirement your entire life, hoping to one day retire as a millionaire. If you’re like many Americans, reaching that magical $1,000,000 milestone is a major lifetime achievement! But what should you do once you’ve hit this target? If you are thinking about saying goodbye to working forever, there are a few steps you need to take to get the most out of your money as efficiently as possible. Let’s explore expert-recommended money moves to ensure your hard-earned retirement dollars serve you well.

Account For Taxes

You most likely don't consider contributing to your employer-sponsored retirement plan or IRA as a gamble. Like many Americans, you probably think about investing in your retirement accounts such as a 401(k), 403(b), 457, Traditional IRA, or even your Pension as a relatively safe bet. Sure, the stock market will fluctuate, but most people believe the market will be higher when they retire compared to where it was when they started saving.?

From a historical perspective, they are correct, the market has always appreciated over long periods - But the taxation of these accounts can catch you off guard if you’re not prepared and accounting for it. You may end up singing a very different tune when you start withdrawing money from your pre-tax retirement account and realize how much is owed to the government. With a record level of federal debt and low taxes, this problem is poised to get worse in the future, not better.?

Protect Your Money

Now that you have $1,000,000 in savings, you absolutely must protect that nest egg. It’s more fragile than you may think. I don’t agree with traditional thinking and the ideology that just because you are retired or “older” means you shouldn’t have any growth in your financial accounts. But market downturns can wipe away your savings, so it’s essential to allocate a portion of your portfolio to a less risky, age-appropriate strategy.

Traditionally, this meant allocating to bonds but over the past few years that hasn’t worked well. Bonds have lost significantly more value than stocks, which have also been down. Consider things like a fixed indexed annuity, which can offer principal protection and no fees, serving as an alternative to bond funds.?

Reassess Your Goals

With $1,000,000 in your retirement fund, it’s time to reassess your retirement goals. Naturally, you should have been thinking about this long before, but we all know things in life change. Make sure your goals, plan, and vision for retirement are all in alignment. If not, take the necessary actions to right the ship.

Reassess Risk Tolerance?

As retirement approaches, reassess your risk tolerance. A more conservative approach can help protect your nest egg from market downturns

Review Your Withdrawal Strategy?

With $1,000,000 saved, it’s natural to think about withdrawals. Most people have heard about the 4% rule and how you shouldn’t run out of money if you don’t withdraw more than 4% in any given year. However, since the 4% rule became the standard, it has since been proven to not be effective at ensuring your accounts last for the rest of your life.?

The other issue is, if your account goes down due to a bear market, your income will go down as well. 4% of $1,000,000 is $40k but if we go through a bear market like 2022 and your account drops to $800k, that same 4% would only give you $32,000 to pay your bills. You would have to make up the remaining $8,000 you were expecting, some other way. And that’s the thing, your bills are not variable, they are constant. So what do most people do? They take the $40k, effectively cashing in a larger portion of their account (5%) which now subjects them to sequence of returns risk and most likely a negative spiral they can’t correct.??Your bills and needs do not diminish if the market drops.?

Bottom line, you absolutely MUST develop a sustainable withdrawal strategy to ensure you don’t outlive your savings. We believe in a bucketing approach; you can read more about it here .?

Consider Long-Term Care Insurance (LTC)

As you age, the likelihood of needing some form of long-term care increases. Sometimes the actual need for LTC can be muddy, but asking the right questions and understanding the potential outcomes of both having coverage or not can help clarify what is important over the long-term.?

Long-term care insurance can prevent depleting your savings due to unforeseen medical expenses. Ultimately it can create peace of mind.?

Revisit Your Estate Plan

Don’t overlook estate planning. Make sure your assets, including your $1,000,000 savings, are distributed according to your wishes when you pass away. By stating your wishes explicitly both through a will/trust and naming beneficiaries on every account, you will reduce potential disputes for your loved ones. I have seen how missing this step can create resentment and ultimately hurt feelings among those you love. It’s already a time of stress and emotion, don’t add to it by skipping this step.?

Stay Active and Invest In Health?

Invest in preventative care, self-care, and a healthy lifestyle. These steps can help you avoid significant medical expenses, leading to a more fulfilling and potentially longer retirement.

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In addition to these expert-recommended moves, remember to maintain healthy money habits like having an emergency fund, eliminating bad debt, and efficient budgeting. Download our Retirement Checklist to make sure you are on the right path. Your $1 million retirement fund is a valuable asset, and with the right actions, you can make it work for you, ensuring a secure and comfortable retirement.