With $900k in a Roth and $2,200 Monthly Social Security, Is Retiring at 66 Feasible?

A woman looks out of the window in her office and contemplates whether she can afford to retire at 66.

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Imagine that you have $900,000 in a Roth IRA and collect another $2,200 per month in Social Security. Can you afford to retire at age 66?

A good way to answer this question is to start with your budget. What do you expect to spend on essentials, like housing and fixed monthly expenses, and what will it cost to maintain your lifestyle? Then take a look at your retirement income and see how all those figures compare. (And if you need additional help planning for retirement or building an income plan, consider speaking with a fiduciary financial advisor.)

Income and Expense Planning

A woman drafts her retirement budget, allocating money to her living expenses and discretionary spending.

For the sake of argument, let’s say that you earn the median household income of $75,000. Conventional wisdom suggests that you’ll need about 80% of your pre-retirement income to maintain your current lifestyle in retirement. That would mean that your Roth IRA withdrawals and Social Security benefits would need to generate about $60,000 before taxes and about $54,600 in after-tax income.

Can that work?

To start, you have $26,400 per year in Social Security benefits. Since full retirement age is 67 for most, your benefits would be around 7% by claiming at age 66. (Based on these numbers you would receive $28,295 per year in benefits if you retired at 67.)

You also have your Roth IRA, which will eliminate your potential tax liability on both your portfolio withdrawals and your Social Security. Since your Roth withdrawals aren’t taxable income, your Social Security benefits wouldn’t generate any federal income taxes either. Also, Roth accounts aren’t subject to required minimum distributions (RMDs) when you reach 73, giving you more flexibility compared to a pre-tax account.

The issue is that your Roth portfolio is relatively light to support a full retirement. You may be able to make the numbers work, but there wouldn’t be a lot of wiggle room in your budget.

For example, take the classic 4% rule for withdrawals, which calls for you to withdraw 4% from a balanced portfolio in your first year of retirement and then adjust subsequent withdrawals for inflation. The 4% rule is designed to stretch a portfolio at least 25 years.

Withdrawing 4% from a $900,000 Roth IRA would give you $36,000 in your first year of retirement. With Social Security, you’d have a combined retirement income of approximately $62,400. Again, this is a tax-free income. But it doesn’t surpass your spending needs by much, limiting your flexibility. More importantly, if your lifestyle or your area in which you live is even modestly more expensive than average, this might not work at all.

You could also consider investing an annuity. With $900,000, a representative lifetime annuity could pay you around $70,440 per year ($5,870 per month), according to Schwab’s Income Annuity Estimator. That would give a combined annual income of about $96,840 (with Social Security).

This may be enough to provide some households with a comfortable standard of living, this income won’t be inflation-protected. As a result, a large portion of your retirement income would lose purchasing power over time. (Whether you need help protecting your money from inflation or evaluating annuity options, consider working with a financial advisor.)

There’s Value in Waiting

A man calculates how much his Social Security benefits will be if he waits until age 69 to claim them.

Alternatively, you could consider delaying your retirement by just a few years. This may be especially attractive if you want to build more flexibility into your budget so you can afford some luxuries, leisure and travel.

If you delay retirement by three years and claimed Social Security at age 69, your benefit would increase to $32,823 per year ($2,735 per month). Second, at the S&P 500’s 10% average annual rate of return, your Roth IRA could potentially grow to about $1.22 million.

Even if you use a 4% withdrawal rate, your Roth portfolio could generate about $48,880 in your first year of retirement. Combined with Social Security, you’d have $81,712 in year 1. Or, you could invest the whole $1.2 million into an annuity that might pay you approximately $95,000 per year. As a result, you’d have a combined income of more than $127,000 in your first year of retirement.

In both of these cases, delaying retirement would give you much more financial flexibility for a comfortable, sustainable lifestyle. (A financial advisor can help you assess when you can afford to retire.)

Bottom Line

With $900,000 in a Roth IRA and $2,200 per month in Social Security, you may be able to afford to retire at age 66. However, it could mean some tight budgeting and thin margins. Instead, it might be wise to wait just an extra couple of years to let your portfolio and benefits grow a little bit more.

Retirement Budgeting Tips

Social Security plays a major role in most Americans’ retirement budgets. Figuring out when to claim your benefits is an important step in the retirement planning process. SmartAsset’s Social Security calculator can help you estimate how much your benefits will be at different claiming ages.
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn't at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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