We’re in our 60s with $1.5 million in IRAs. Can we retire next year?

I am 64 years old and my wife is 65 years old. We have $1.5 million in 401(k)s and IRAs and $90,000 in a Roth IRA. We are thinking of retiring next year. I will receive a monthly pension of $3,000, which my spouse will inherit upon my death. He’ll get $2,600 from Social Security and I’ll get $3,800 I’m considering waiting until he’s 67.

Our current total salary is $210,000. We have 2 homes with a $500,000 primary mortgage at 2.75 percent interest. Our other house has a $300,000 mortgage at 2.75% with $800 positive cash flow rent after paying off our mortgage. We have two challenges ahead: tax optimization and making sure our money lasts.

I also have a $300,000 health savings account that will help us with our medical expenses. I don’t plan to leave money to the children except at least one of the houses. Each of the properties is worth approximately $1 million. What advice can you give about our plans to retire in 2026?

I am 64 years old now

Relating to: 2025 has been a terrible year. Consumers should expect more ‘silent pain’ in 2026.

Congratulations on leaving no money to your children! (Except for one or both of your homes, which is a substantial and generous inheritance.) I’ve said it before and I’ll say it again: Your assets are not your children’s inheritance unless they pass into bank accounts upon your death. Until that happens, this is your money.

Considering your properties, rental income, future Social Security benefits, pension, and more than $1.5 million in retirement funds, you’re in a great place. In fact, between your Social Security and your pension, you have a guaranteed annual income of $112,800 for life. And that’s before you dive into your IRA or your $9,600 annual profit from your rental.

If you took 4% per year from your IRA — and clearly you can afford to take much less than that — you’d earn another $63,600 per year, bringing your grand total to $176,400. If your withdrawals are controlled, made with the advice of an accountant, and you avoid withdrawals during market downturns, then you will not need to follow the 4% rule.

In your favor: (1.) You don’t have to rely solely on your IRA. (2.) You have a large $300,000 HSA to cover decades of healthcare tax-free. (3.) You have rental income that more or less covers the cost of your housing. (4.) You can increase your cash flow by selling one of your homes. (5.) And you don’t have to worry about leaving money behind.

Your required minimum distributions (RMDs) should be your focus. If you’re not careful, you’re currently on track to fall into the 24% and/or 32% tax brackets; this may be even higher than during your working years. You also expose yourself to monthly adjustment amount (IRMAA) surcharges associated with Medicare income.

If you choose to accept, your mission is to avoid falling off the tax cliff into the 32% bracket, and one way to do that is to start your Roth conversions as soon as possible (provided your financial advisor gives the green light to such a strategy). A typical Roth conversion window is after you retire and before you claim Social Security.

You have a pretty nice feather in your cap: a $300,000 Health Savings Account that you can use strategically during your retirement years. The best part about HSA accounts? Withdrawals are tax-free and do not affect your Medicare IRMAA, Social Security tax rate, or other taxable income.

And there’s a wind in that feather that works in your favor: Time. Under the SECURE Act 2.0: your first RMD for you and your spouse would be at age 75. These apply to traditional IRAs and 401(k)s and not to Roth accounts funded with after-tax dollars. At age 75, your RMD is that age divided by 24.6; this equals 4.07% of your deferred tax balance.

Other tasks on your “to do” list: Estimate your monthly expenses in retirement and stress test it against your income. Decide whether to collect Social Security at age 67 or wait until age 70 (and earn about 8% more per year). Create a “tax map” with your accountant to estimate your brackets before and after your Social Security and RMDs.

Go ahead and retire and keep your accountant on speed dial.

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Previous articles by Quentin Fottrell:

‘Never asks for anything’: I’m 61 and have a $1.5 million 401(k). My girlfriend says I do too much for my 28-year-old son. Is he right?

‘Am I just the unloved son?’ After my father died, my mother saw me as a ghost. Is he stealing his money?

‘We all have economic tensions’: Should my son buy a $600,000 house after the Fed rate cut?