If I was 60 years old with $1 million saved for retirement, my first question would not be, “Which investment will produce the highest return?” I would ask, “How can I turn this money into dependable income without sacrificing all my liquidity?”
I would want enough guaranteed income to cover my lifestyle, protection against market downturns, and money available for emergencies and future growth. Here is how I would approach that decision.
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1. What Is My Main Retirement Goal?
Before purchasing an annuity or making another investment, I would decide what I need the $1 million to accomplish.
My priorities would be:
- Creating dependable lifetime income
- Protecting myself and my wife from longevity risk
- Keeping enough liquid money available
- Maintaining some exposure to market growth
- Reducing sequence-of-returns risk
I would also consider when I want the income to begin. Starting income at age 60 produces a different result than waiting until 65 or 67.
The right choice depends on whether I am fully retiring, continuing to work, or using part-time income to bridge the gap until Medicare and Social Security begin.
2. How Much Income Could $1 Million Generate?
In the illustration I reviewed in the video above, a 60-year-old in Nevada who placed $1 million into an annuity and began income immediately could receive approximately $63,000 per year.
That equals about $5,250 per month in guaranteed income. For someone who also earns another $5,000 per month from a business, part-time position, or full-time job, this could create a strong income bridge between ages 60 and 65.
However, I might not need to begin the annuity income immediately. If I purchased the contract at 60 and waited five years, the illustrated joint income for me and my wife increased to approximately $8,387 per month.
That is about $100,000 per year from the annuity. If I also received approximately $40,000 per year from Social Security, my combined guaranteed income could be around $140,000 annually.
These numbers are only examples. Your income will depend on factors such as your age, state, premium, income start date, individual or joint-life coverage, and the products available at that time.
💡 Pro Tip: Compare several income start dates before choosing an annuity. Waiting even a few years may substantially increase the income available, but the best date should fit your actual retirement plan.
3. Why I Might Wait Until Age 67
If I did not need the money at 60, I might wait until 67 to activate the annuity income. That would allow the income benefit to grow while I continued working or relied on other assets.
In the $1 million illustration above, waiting seven years produced approximately $121,000 per year in joint lifetime income. If I also received an estimated $55,000 from Social Security, that would give me roughly $176,000 in annual guaranteed income.
That income would continue for the rest of my life under the contract terms. Because my wife is four years younger than me, I would select joint-life income so payments could continue for the rest of her life as well.
For me, this money would not primarily be about leaving an inheritance. My children could inherit other assets, such as stocks, real estate, or whatever remained in my estate.
The annuity would be designed to provide the highest dependable income possible for my wife and me. It would help protect us if one or both of us lived into our 90s or beyond.
This is why longevity matters so much in retirement planning. You might expect to live only as long as your parents did, but medical advancements and longer life expectancies could result in a much longer retirement than you anticipated.
👉 Want to see what different income start dates could provide? Visit the website to use the annuity calculators or schedule a call with me.
4. Why I Would Not Put Everything Into an Annuity
If the $1 million represented all my liquid assets including my IRA, 401(k), savings, and taxable investment accounts I would not put the entire amount into an annuity.
I would want to keep plenty of liquidity. Insurance companies also review an applicant’s financial position and may reject an application if purchasing the annuity would leave that person without sufficient liquid assets.
Personally, I would not put more than $700,000 to $750,000 into the annuity. If I could generate the income I needed with less, I would use less.
An annuity can provide valuable guarantees, but it should not leave you without accessible money for:
- Medical expenses
- Home repairs
- Major purchases
- Family emergencies
- Travel and lifestyle expenses
- Future investment opportunities
Once money is placed into an annuity, surrender charges and withdrawal restrictions may apply. That is why the decision must be based on your entire financial picture, not simply which contract advertises the highest income.
5. How I Would Divide the $1 Million
If the entire $1 million represented my liquid retirement savings, one allocation I would consider is:
- $700,000 in an annuity for joint lifetime income
- $100,000 in cash for liquidity and emergencies
- $200,000 invested for long-term growth
Placing $700,000 into the annuity at age 60 and waiting until 67 produced approximately $85,000 per year in joint lifetime income.
The contract included an 8% compounded roll-up on the income benefit base during the seven-year deferral period. That brought the benefit base to nearly $1.2 million, which was then multiplied by an approximately 7.1% payout rate to determine the annual income.
It is important to understand that the income benefit base is used to calculate payments. It is not the same thing as cash value that can be withdrawn as a lump sum.
Based on the assumptions, the lifetime payments through age 95 totaled approximately $2.5 million. I sometimes describe that as purchasing a $2.5 million pension with a $700,000 premium, although the actual total received would depend on how long my wife and I lived.
Meanwhile, the remaining $300,000 would give me flexibility. I could keep $100,000 in cash and invest $200,000 in the stock market with the goal of long-term growth.
If that $200,000 performed well over seven years, it might grow substantially or even double. However, that outcome would be a market-based possibility not a contractual guarantee.
6. Guaranteed Income Versus a Market Hypothetical
I could leave the entire $700,000 invested in the stock market and hope it grew to approximately $1.4 million over seven years. If that happened, I could use the larger portfolio to create retirement income later.
The problem is that the result is not guaranteed. I would also be assuming that annuity payout rates and the interest-rate environment would be equally favorable seven years from now.
I would need to consider sequence-of-returns risk as well. If the market performed poorly during the first few years or fell 20% shortly before I retired, my income plan could change significantly.
The annuity illustration gave me a benefit base of nearly $1.2 million after seven years. That was about $200,000 less than the hypothetical $1.4 million market outcome, but it was based on a contractual income-benefit calculation rather than hoped-for market performance.
The contract also charged a fee for its income rider. I would be comfortable paying that fee if the rider delivered something valuable, namely, the 8% compounded benefit-base growth, which resulted in the guaranteed joint lifetime income shown in the illustration.
In this example, the rider charges ended after the contract value was depleted, while the guaranteed income continued according to the contract’s terms.
The decision ultimately comes down to one question: Do I want to depend entirely on a market projection, or do I want to contractually guarantee part of my retirement income?
There is no single correct answer for everyone. I would personally use both guaranteed income for stability and liquid investments for flexibility and growth.
👉 Want help comparing guaranteed income with your current portfolio strategy? Schedule a call with me, and we can review the available options.
Conclusion
If I was 60 years old with $1 million, I would not place all of it into one product. I would use enough potentially around $700,000 in this example to create the joint lifetime income I wanted while keeping the rest available for cash reserves and market growth.
The right allocation depends on your income needs, retirement date, Social Security strategy, spouse’s age, existing assets, and comfort with market risk. My goal is to show you the available options transparently so you can decide whether you prefer a guaranteed outcome, a hypothetical market outcome, or a combination of both.
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