How does your contribution compare to other retirees?

You’ve spent decades building your retirement savings. Now comes the part where you make it last. In your 70s, the questions change. It’s no longer about how much you can save, it’s about how much you can safely spend without running out of money.

The average American in their 70s has $250,000 saved, but half of them have less than $107,000. Whether you’re above or below that line, the real question is the same: Is it enough? The answer depends on more than just your account balance. It’s about coordinating what you’ve saved with Social Security, managing your RMDs, and timing everything so your money outlasts you — not the other way around.

How big should my nest eggs be now?

There is no single “correct” number for your nest eggs. The right number is what leaves you with enough total resources — savings plus Social Security plus any pensions or other income and assets — to fund your lifestyle. A retiree with a paid-off home, $200,000 in savings, and full Social Security benefits may be better off than a renter with $500,000 or less from Social Security.

The average 401(k) balance among Americans in their 70s is $250,000 but the median is $106,654. That means half of retirees in their 70s have saved less than $107,000. For someone with an average balance who follows the classic 4% rule, that would mean a safe withdrawal of only about $4,280 per year.

Compare that to the average annual benefit for a 70-year-old Social Security recipient: $26,120.

How much should you withdraw from retirement savings?

Your focus should be on creating a long-lasting source of income. Many experts suggest that your assets and income in retirement should replace 75% to 85% of after-tax work income.

The classic “4% rule” for safe withdrawal rates is still widely used, but its creator, Bill Bengen, has since modified it to 4.7% (with annual inflation adjustments). Following this rule, a person with a $500,000 portfolio would start with $23,500 in the first year.

Prefer flexibility? The “guardrails” strategy adjusts drawdowns up or down based on market performance and supports higher initiation rates (closer to about 5%) for many portfolios, rolling back years to protect longevity.

But remember, traditional IRAs and 401(k)s are tax-deferred, not tax-exempt (like Roth IRAs). This means you’ll still have to pay income tax on what you get (including mandatory RMDs), but the assumption is that your tax rate will be lower in your retirement than in your working years.

Smart tax withdrawal sequence

How you withdraw from your accounts is no less important than the amount. Fidelity has found that withdrawing proportionately from taxable, tax-deferred, and Roth accounts (rather than emptying one “bucket” first) can smooth taxes and potentially extend the life of the portfolio.

A common strategy is to first “fill your tax bracket” with traditional IRA/401(k) withdrawals, then meet any remaining income needs from taxable and Roth accounts. Withdrawing Roth dollars (when you’re eligible) avoids increasing your adjusted gross income (AGI) — and may help you keep more of your Social Security tax-free.

Social Security Taxes: Up to 85% of Social Security benefits can be taxed on a “provisional income” basis (AGI plus tax-exempt interest plus half of Social Security). Coordinating IRA withdrawals according to this formula can help reduce the portion of your benefit that is taxable.

If you build Roth accounts while working, they are your pressure valve. When you have unexpected expenses — such as major home repairs, medical bills — withdraw from the Roth instead of increasing your AGI and possibly your Social Security income tax.

Working into your 70s changes things

If you are still running, this changes your withdrawal strategy. If you are in your current employer’s 401(k), you can delay RMDs from this account until your retirement year. You still have to get RMDs from previous IRAs and employer plans.

The work is also changing the overall tax picture. Earned income plus RMDs plus Social Security can push you into higher categories. But if you’re still working, you can continue to make 401(k) or IRA contributions, using those contributions to offset some of your taxable income. An employer match, if offered, is essentially free money, even in your 70s.