MW I'm 64, have $1.2 million in a 401(k) and two mortgages. Can I afford to retire?

By Quentin Fottrell

'My monthly expenses are $6,500'

"I will have $3,000 Social Security every month, and a $1,064 pension that will never increase for inflation." (Photo subject is a model.)

Dear Quentin,

I am 64. I want to retire next year.

I have $1.2 million in 401(k) and IRA. I will have $3,000 Social Security, and a $1,064 pension that will not increase for inflation. I have $400,000 in home equity in my main home and vacation home, with small mortgages on both.

My monthly expenses are $6,500 (I have been tracking every penny for two years) including travel to Europe once a year, though I may want to travel a little more in early retirement. What do you think?

When I'm 65

Related: 'I think we're in a market bubble': I'm 62, retired and want to move my $200K IRA to a money-market account. Am I being too cautious?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

You'll need another $29,000 to make up the shortfall of your annual expenses.

Dear When,

You can retire when you're 65.

If you can't retire on these figures, millions of Americans are in trouble. Yes, you can retire and should retire, if that's your plan. You'll be pulling in nearly $49,000 a year between your Social Security benefits and pension, so you'll need another $29,000 to make up the shortfall of your annual expenses.

You can do that by taking just 2.4% from your $1.2 million 401(k) every year. If your investments never earned another penny after you retired, which is highly unlikely given that they're projected to earn 10% annual return based on historical averages, your 401(k) would last another 40 years. Happy 100th birthday to you in advance!

Your two mortgages will weigh on your expenses, so you may have a decision: sell one residence and pay off the mortgage on your primary home; take a chunk of money from your 401(k) to pay off one or both mortgages, while making sure you have enough left to see you through the next several decades; or maintain the status quo.

You can meet your expenses by taking just 2.4% from your $1.2 million 401(k) every year.

Adding a second trip to Europe or elsewhere might add another few thousand dollars to your annual vacation budget, so you may wish to withdraw 3% or the recommended 4% of your 401(k) every year. Your investments would still continue to grow and see you through your retirement.

Specifically, with 7% annual returns and withdrawals increasing by 3% a year to account for inflation, your 401(k) would be worth $1.6 million after 10 years, $2.2 million after 20 years and $2.9 million after 30 years. Ideally, your Social Security and pension means you can limit withdrawals during a market correction or prolonged downturn.

All things considered, you're doing pretty well. "On average, Americans approaching retirement at 60 have around $200,000 to $250,000 in retirement savings," says Western & Southern Financial Group. "Still, financial experts often recommend having at least eight times your annual salary saved by this age."

Social Security and Medicare

"If earning a current salary of $100,000 a year, you should aim for at least $800,000 to $1 million in retirement savings by 60," Western & Southern adds. "This figure isn't set in stone, it's a guideline. Your actual needs could be higher or lower depending on where you plan to live, healthcare costs and your desired standard of living."

You won't get your full Social Security entitlement until you reach "full retirement age" as you turn 67. If you wait until you're 70, you will earn another 8% a year on top of those full-retirement-age benefits. Plus, factor in an emergency fund for home repairs and your Medicare premium, deductibles, coinsurance and copays.

People age 65 and older choose Medicare coverage during open-enrollment season, which runs from mid-October until December. They can switch between traditional Medicare and a Medicare Advantage plan during that period, enroll in or change Part D prescription-drug plans and also add Medigap, a type of supplemental insurance.

A "moderate risk" portfolio at your age would have 60% stocks, but that's not set in stone.

Medicare Advantage's open-enrollment period runs from Jan. 1 to March 31. During that time, beneficiaries aged 65 or above can switch to another Medicare Advantage plan, or ditch their Medicare Advantage plan and return to traditional Medicare. There are proposals to auto-enroll people in Medicare Advantage. (You can read about that here.)

Your retirement plan should consist of three pillars: accumulation, distribution and diversification. Charles Schwab says investors in the early stage of retirement "may want a greater allocation to stocks to guard against longevity risk, while those in their later years will want to prioritize income generation and capital preservation."

This risk assessment is a guide, not the gospel: At age 60 to 69, consider a moderate portfolio (60% stocks, 35% bonds, 5% cash/cash investments); at 70 to 79, a moderately conservative one (40% stocks, 50% bonds, 10% cash); and at 80 and above, a conservative one (20% stocks, 50% bonds, 30% cash), Charles Schwab $(SCHW)$ adds.

Send us a postcard from Europe when you get there.

Related: 'I don't come from money': I received $1.2 million after a family tragedy. Am I foolish to keep it in a money-market account?

The Moneyist regrets he cannot reply to questions individually.

More columns from Quentin Fottrell:

I inherited a $30K trust. My bank says I'll pay $10K in taxes if I cash out. Something is not right.

My mom, 94, is leaving her $1 million estate to me, my brother and his daughter. Is that fair?

'He thinks nothing of spending $40K on a new car': My husband gives me the silent treatment. How can we agree on finances?

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-Quentin Fottrell

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October 04, 2025 06:41 ET (10:41 GMT)

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