64-year-old with $1.2 million 401(k) asks if retirement is affordable
A 64-year-old individual with $1.2 million in a 401(k) and two mortgages is seeking advice on whether they can retire comfortably. The person's situation involves balancing retirement savings against ongoing housing debts. Financial experts emphasize the need for careful planning in such scenarios.
The query comes from a 64-year-old who has accumulated $1.2 million in a 401(k) retirement account but faces financial commitments from two mortgages—one on their primary residence and another on a vacation home. This situation raises questions about the feasibility of retiring without depleting savings too quickly.
According to the MarketWatch article, the individual is approaching retirement age and wants to assess their financial readiness. Key details include the substantial 401(k) balance, which represents years of disciplined saving, but the dual mortgages add complexity. The person did not specify the exact mortgage amounts or interest rates, but such debts can significantly impact post-retirement cash flow.
Financial advisor Allan Roth, featured in the piece, provides guidance on evaluating retirement affordability. Roth suggests calculating sustainable withdrawal rates from the 401(k), typically around 4% annually to make funds last 30 years or more. For $1.2 million, this equates to about $48,000 per year before taxes and inflation adjustments. He advises considering Social Security benefits, which the individual could start claiming at age 67, potentially adding $20,000 to $30,000 annually depending on earnings history.
The advisor also recommends paying down mortgages before or during early retirement to reduce expenses. "High-interest debt can erode retirement savings faster than expected," Roth notes. However, if the mortgages have low rates, it might be wiser to invest the 401(k) funds for higher returns rather than accelerating payments.
Contextually, this query reflects broader trends in American retirement planning. With many nearing 65 carrying mortgage debt—unlike previous generations who often paid off homes before retiring—the average retiree now manages housing costs alongside fixed incomes. The article highlights that 401(k) balances like $1.2 million are above the median for that age group, per Vanguard data, but individual circumstances vary widely.
Ultimately, Roth urges consulting a fee-only financial planner for personalized analysis, including expense projections and investment strategies. The piece underscores that while $1.2 million is a strong foundation, affordability hinges on lifestyle choices, debt management, and market conditions.