How Long Does $1.5 Million Last Once You Retire?

Running out of money in retirement is a huge concern for a lot of people. In fact, recent data from Allianz found that 61% of Americans say they're more worried about running out of money in their lifetime than actually dying. Yikes.

Now, you might assume that the more money you bring with you into retirement, the lower your chances of depleting your individual retirement account (IRA) or 401(k) balance. But actually, having a larger nest egg doesn't guarantee that your savings won't run out on you. To avoid having that happen, you'll need to adopt a really savvy approach to taking withdrawals.

It's all about managing your financial resources

Many people come into retirement with little to no money in savings, so if you're sitting on a $1.5 million nest egg, you should be proud of yourself for having amassed that much money.

That said, it's possible to deplete a $1.5 million nest egg faster than a $500,000 one if you aren't careful. To put it another way, $1.5 million could end up lasting for 30 years in retirement, or it could end up lasting for 10 years -- or even less time. It really boils down to how you choose to live and spend your money.

If you decide that you're going to take large withdrawals from your nest egg early on so that you can travel and enjoy retirement while you're relatively young, then you might end up increasing the risk of depleting your savings -- even if you're starting off with a lot of money. Also, the way your money is invested is apt to play a role in how long it lasts.

It's natural to shift away from riskier assets like stocks and go heavier on bonds in retirement, since bonds have historically been less volatile. But if you unload your stocks completely, your savings may not grow the way you want them to, thereby putting you at risk of running out of funds at some point in time.

What withdrawal rate is best for you?

Ideally, your retirement nest egg will consist of a mix of stocks, bonds, and even cash. But you'll need to land on a withdrawal rate that makes your money likely to last.

For years, financial experts stood behind the 4% rule, which had you withdrawing 4% of your savings balance your first year of retirement and then adjusting subsequent withdrawals for inflation. Nowadays, many experts will tell you that 4% is too aggressive a withdrawal rate, largely due to the fact that bonds, which retirees tend to be pretty heavily invested in, aren't paying as much interest now as they were when the 4% rule was established.

You may want to work with a financial advisor to come up with a withdrawal strategy that works for you. And it doesn't have to be the same rate throughout your retirement. You could decide to take 4% annual withdrawals when you're younger (to take advantage of your good health), and then scale back to 2% or 3% when you're older and are staying closer to home. There are different options to work through.

The point, however, is that if you're coming into retirement with a $1.5 million nest egg, your money could last a really long time, or it could last only a short amount of time. How you fare will hinge largely on how you invest your savings and how you manage your withdrawals.