I Have $1 Million in My IRA. Can I Stop Saving for Retirement?

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  • Many people struggle to build savings for retirement.
  • If you've amassed $1 million, you're in great shape, but you may end up needing or wanting more than that to uphold your preferred lifestyle.
  • You may also want to keep funding an IRA to enjoy the tax breaks involved.

The answer depends on your financial situation and goals.

Many people struggle to build retirement savings. And it's pretty easy to see why.

It's hard to allocate money to future expenses when you're barely able to cover your near-term expenses -- something a lot of people are experiencing these days due to inflation. And even during periods when inflation isn't as much of an issue, between your mortgage, car payments, and general bills, you might struggle to consistently fund a retirement plan, even if you'd like to.

But what if you've managed to build yourself quite a respectable nest egg already? The average IRA account balance as of 2022's third quarter was about $102,000, according to Fidelity. But you may have saved a lot more by contributing steadily to your IRA over time and investing your money in a savvy manner.

In fact, you may already be sitting on a $1 million IRA balance with many more working years ahead of you. And that raises the question: Should you push yourself to keep funding that account, or is $1 million in savings enough?

Take your personal needs and goals into account

For some people, $1 million in retirement savings will more than suffice. But for others, a $1 million nest egg might fall short. And you'll need to figure out which category you're in before you decide to stop funding your IRA after reaching the $1 million mark.

Seniors are often advised to try to replace about 70% to 80% of their income to live comfortably. So if you earn $100,000 a year, you might want $70,000 to $80,000 in retirement income annually.

Now, let's say Social Security will provide you with $24,000 a year in benefits. If you withdraw from your $1 million IRA at a rate of 4% per year, which is what financial experts have long recommended, you'll have $40,000 a year to work with. Add that to your $24,000 in Social Security, and you may end up a little short.

But that assumes you'll need $70,000 to $80,000 a year in retirement. Maybe you won't.

Maybe your plan is to downgrade your lifestyle a bit in retirement by relocating to a less expensive part of the country and living more frugally. If so, then a $1 million IRA might more than suffice. And if you've sacrificed many things to fund that retirement plan through the years, you may decide that you're done, and that going forward, you'll use the money you would've contributed to do things like travel or even help your kids out financially.

Keep the tax benefits in mind, too

You may decide that with a $1 million IRA, you'll have access to all of the retirement income you'll need. But even in that case, you might still want to keep contributing money to your IRA for one key reason: to score a tax break on your income.

When you put money into a traditional IRA, you exempt that much of your income from taxes. So even if you're thrilled with your $1 million IRA balance and feel you're more than set with it, pumping extra cash into that account could still be a wise move -- especially if you're someone who likes paying the IRS as little money as possible.

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