How I'd Invest $1,000,000 for Retirement at 62

I'm Tyler, a former financial advisor and portfolio manager, and I create financial content for free so you can avoid unnecessary costs.

Step 1: Determine Annual Spending Needs

First, I would determine exactly what I needed to spend each year. For this example, let’s say it’s $80,000.

Step 2: Adjust for Unforeseen Expenses

Next, I’d multiply that number by 1.5 to account for any unforeseen expenses. This means I’d plan to invest $120,000 in US T-bills. This approach focuses on liquidity and easy access to funds, avoiding mutual fund fees.

Step 3: Invest in Long-Term Growth

After allocating funds for T-bills, I would invest the remainder in an S&P 500 index fund. Since I want to live until 85, I cannot afford to sacrifice 23 years of long-term growth in pursuit of principal protection through bonds.

Step 4: Tax-Free Withdrawal Strategy

My withdrawal strategy would involve drawing down 6% per year, which would net me around $52,800 of tax-free income due to being in the 0% tax bracket for capital gains.

Step 5: Social Security Supplement

Additionally, I’d complement my income with $25,000 from Social Security to maintain an annual income of just under $80,000 a year. This plan eliminates financial headaches and allows for a stress-free retirement, enjoying activities like high-stakes Mahjong and low-sodium prune juice.

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