I'm 60 and Retiring Soon. How Should I Structure My $1.2 Million Portfolio?

Broadly speaking, there are three stages to retirement planning: accumulation, distribution and estate.

The accumulation phase refers to your working life, which is when you build the wealth that you’ll eventually retire on. This stage is about savings, growth and long-term investing.

The estate phase of your retirement plan is when you make preparations for after you’re gone. This stage is about goals, taking care of loved ones and the things that matter most to you.

In the middle, there’s distribution. This is when you collect and spend your money in retirement. This stage is about balancing the security of short-term withdrawals against your need for long-term growth.

Each phase requires a different approach and a different plan.

For example, let’s say you’re 60 years old with $1.2 million in your retirement account. You’d like to retire at 65, which is slightly earlier than full retirement age, but not by too much. How should you structure your portfolio? Here are a few things to think about. A financial advisor can also help you determine what might make sense for your ideal retirement scenario.

1. Evaluate Your Approach to Risk

The distribution phase of retirement planning involves an entirely new approach to risk.

During the accumulation phase, most households invest in higher-risk assets. It is common, for example, for people to invest heavily in S&P 500 index funds, a high-volatility asset relative to many alternatives. This is chiefly because you can take a long-term approach to accumulation. You won’t need this money any time soon, so you can let it ride out the bear markets.

In distribution, your approach to risk likely changes. You’ll need to take income from this portfolio, which means you can’t always let your investments ride out a downturn. In order to avoid having to sell assets at a loss, most households shift their portfolios to a more conservative mix of assets such as bonds and annuities.

For your own planning, your approach to investment in retirement should depend on how you can manage risk. The more flexibility you have to adapt around bear markets, the more you can invest for higher-growth, higher-risk assets during your retirement. For example, if you have lots of room to cut spending, alternative assets to draw income from, or other options that allow you to leave your portfolio in place during a bear market, you can invest in higher-risk, higher-growth assets.

On the other hand, if you’ll need to rely on the income from this portfolio for a predetermined amount, then it might be a good idea to invest for more security. This is where a financial advisor can help you explore your options.

2. Anticipate Inflation, Taxes and Longevity

There are three systematic risks that all retirees should plan for: inflation, taxes and longevity. Each of these can erode the long-term value of your portfolio in different ways.

Longevity means taking your estimated lifespan into account. Basically, how long will you need this portfolio to last? A retiree may expect live to around age 87 or even longer. So, if you retire at age 65, you’ll want to plan for a retirement that will last for at least 25 years, preferably 35. Otherwise, you’ll risk running out of money and having to live off Social Security alone.

Inflation is the eroding value of money over time. Each year things cost a little bit more, which means the same amount of money will buy less. At the Federal Reserve’s target 2% annual rate of inflation, this causes prices to double roughly every 35 years. At this rate, unless your portfolio and income grow, it will cost twice as much money to maintain the same standard of living 35 years from now. There are many ways to address this, but in general, the best option is to plan for your portfolio income to increase by 2% each year.

Finally, you’ll pay taxes on the income you take from most retirement portfolios. A pre-tax portfolio, like a 401(k) or a traditional IRA, will generate income taxes on the full value withdrawn. If you use a taxed portfolio, you’ll pay either capital gains taxes or income tax, depending on the nature of your assets. Like during your working life, this means you need to plan for your after-tax, spendable income. The only exception is if you hold a Roth IRA or Roth 401(k). In this case, you won’t pay any taxes on your withdrawals.

3. Evaluate Your After-Tax Income

With these factors in mind, consider how to structure your portfolio. You’ll be looking to generate a reliable annual income that meets three goals:

Fills your spending and lifestyle needs
Fits your risk management plan
Addresses your inflation, longevity and tax risks

While you should take a thorough look at your anticipated budget, a good place to start is with the 80% rule. This is the idea that, in retirement, you’ll need about 80% of your working budget to maintain the same standard of living. So if, for example, you make $100,000 pre-tax, you should plan on an $80,000 pre-tax budget in retirement.

You can start by accounting for Social Security. As of February 2025, the average Social Security benefit was $1,976 per month, or $23,712 per year. Even if you retire early, it’s typically worth drawing a little more from your portfolio and waiting to collect full benefits at age 67.

From there, look at how to invest. If you currently have $1.2 million at age 60, this means five more years of growth. Then you’ll shift to a distribution strategy. Let’s say that you’re currently invested in a mixed-asset portfolio returning 8% per year (roughly the average return of a half-and-half equity/corporate bond portfolio). Setting aside additional contributions, by retirement age, you might have about $1.76 million in your portfolio.

Then, let’s look at four possible investment strategies:

Structured assets: All annuities
Possible pretax income: $136,284
Possible pretax combined income (with Social Security): $159,996 per year
Benefits: Contractually guaranteed income for life
Risks: No growth to offset inflation

Conservative assets: All corporate bonds, 5% average yield
Possible pretax, inflation-adjusted income: $80,000 for 35 years
Possible pretax combined income (with Social Security): $103,712 per year
Benefits: Secure, with significant interest income
Risks: Low growth leading to less income

Mid-range assets: Mixed portfolio of equities and bonds, 8% average return
Possible pretax, inflation-adjusted income: $115,000 for 35 years
Possible pretax combined income (with Social Security): $138,712 per year
Benefits: A balance of growth and risk, given the mix of assets
Risks: More volatility due to the equity portion of the portfolio

High-growth assets: All equities held in an S&P 500 index fund, 11% average return
Possible pretax, inflation-adjusted income: $155,000 for 35 years
Possible pretax combined income (with Social Security): $178,712 per year
Benefits: Strong average returns leading to high income
Risks: Very high volatility associated with equities

In all cases, your portfolio and Social Security can generate a combined income well above the median household income. The question is how this works with your own needs. Evaluate your budget and spending, balanced against your risk management options, to decide which approach meets your personal needs. You can also consider reaching out to a financial advisor if you would like some guidance.

Bottom Line

Structuring your portfolio in retirement requires a different approach from how you built it during your working years. You need to prepare for a balance of security and reliability, set against the need for real growth during a (hopefully) long retirement. Hitting both of those targets well takes skill and planning.

Retirement Income Tips

Do you have enough to start planning for a retirement? Don’t just rely on back-of-envelope math and rules of thumb. Our retirement calculator can help you generate real numbers based on your real income and needs, right now.
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Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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