We’re in our 70s and have $1.4 million. We pay $1,750 in rent. Will we run out of money in retirement?

“Our adjusted gross income was $160,000 last year. We both also have fairly good health insurance.” (Photo subject is a model.) - Getty Images/iStockphoto

Dear Quentin,

I am 75 and retired with $1 million in investments and $400,000 in savings and CDs.

I get $1,320 a month in Social Security and a small pension from my former employer. I also have no debt and have a long-term-care policy. My partner, 74, does not have a policy and is still working. He will get 80% of his salary when he retires. Our car is paid off.

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Our adjusted gross income was $160,000 last year. We both also have fairly good health insurance. We don’t have a mortgage, but we pay $1,750 a month in rent for an apartment. Do we have to worry about running out of money once he retires?

Wondering

Don’t miss: ‘I can only rely on myself’: How do I protect myself from my parents’ nursing-home bills?Given your guaranteed income and your respective ages, your investments are unlikely to run out. - MarketWatch illustration

Dear Wondering,

I would describe your retirement as sound as a pound.

If your partner is earning $100,000, he would get $80,000 a year when he retires. Combined with your Social Security ($15,840 a year) and your unspecified pension (let’s say $10,000 a year, to be on the conservative side), your total retirement income would be more than $100,000 a year. And that’s without even tapping into your $1.4 million investments. A six-figure retirement income is not a bad outcome.

A 4% annual withdrawal rate from your portfolio, adjusted for inflation in subsequent years, is recommended as a good goal over a 25- to 30-year retirement period. That works out at $3,333 a month or $40,000 a year. Adding that to your other sources of income, you are collectively bringing home an income that is pretty close to your combined working salaries. But the longer you leave your investments, the more they will grow.

Given your guaranteed income and your respective ages, your investments are unlikely to run out. Ideally, this is the time to start taking your foot off the proverbial pedal and enjoy your retirement, if you are keen to free up more leisure time for yourselves. We spend our working life paying taxes in the hope that we have a decent Social Security benefit when we reach full retirement age and, if we are fortunate enough, a pension and Social Security.

For what it’s worth, the average monthly Social Security check is just shy of $2,000, according to the Social Security Administration, so you’re not too far behind the Average Joe. When you’re in your 70s, advisers say your asset allocation should be on the conservative side (70% in bonds and other safe havens and 30% in stocks), but that’s highly individual. It depends on your risk tolerance and your level of stability. You could easily have more than 50% in equities.

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Renting and Social Security

My gut tells me that you can start taking withdrawals from your investments, even small ones, if you need money. Your only area of uncertainty is your rental accommodation; let’s assume your rent will continue to creep upwards. The average retirement savings for people ages 65 to 74 is $609,200; for those 75 and older, it’s $462,400. The median would be a lot lower. Once again, you’re up there with the national average, especially given your partner’s generous pension.

As you are both in your mid-70s with strong liquid assets and no debt, continuing to rent gives you both flexibility and allows you to move to a different (even warmer) climate when you both stop working in earnest. If you don’t mind the uncertainty, there’s a lot to be said for renting: You don’t have to worry about maintenance or property taxes. I assume you’re paying below the market rate (at $1,750 a month) and $21,000 is not a big chunk of your overall net worth.

I assume you waited until you were at least 70 to take Social Security. The SSA encourages people to delay taking Social Security by offering a bump in payments if they wait. The SSA reminds people who delay retirement to sign up for Medicare at 65. You get 100% of your Social Security benefit at full retirement age. If you wait until age 70, you receive approximately 8% more per year. The final outcome all depends on how long you live.

Millions of Americans keep working into their retirement, just like you. For now, you are both in a good spot. The average 401(k) balance hovers at roughly $242,000 for baby boomers (born 1946–1964) and $182,000 for Generation X (born 1965–1980), according to Fidelity. The average 401(k) retirement balance across all age groups is $127,000. Some 75% of nonretired adults had at least some retirement savings, but 25% had no retirement savings.

Keep saving your money and put those worries away.

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