By Gregg Gonzalez, CFP®, CFF®
You’ve worked hard, saved diligently, and now you’re ready to transition from earning a paycheck to living with purpose in retirement. But one of the biggest challenges individuals and families face when approaching retirement is this: How do you turn your assets into a predictable, sustainable income?
Welcome to retirement income planning: the art and science of turning your savings into a steady stream of income you can count on.
1. Shift the Mindset: Accumulation vs. Distribution
For years, your financial focus was accumulation: building your wealth through saving and investing. Retirement flips the script. Now, it’s all about distribution: how you’ll draw from those savings to support your lifestyle, without outliving your money.
This shift involves a different approach to risk, taxes, and budgeting. A well-crafted income plan can help reduce anxiety, provide confidence, and ensure your money lasts as long as you do.
2. Understand Your Income Sources
In retirement, income typically comes from several sources:
- Social Security
- Pensions (if available)
- Retirement accounts (401(k), IRA, etc.)
- Taxable investment accounts
- Annuities or rental income
Coordinating these sources effectively is crucial to maximizing your income and minimizing taxes.
3. Optimize Social Security Timing
Social Security is a foundation for many retirement plans. While you can start claiming benefits as early as age 62, waiting until full retirement age – or even age 70 – can significantly boost your monthly benefit.
Here’s why timing matters:
- Claiming early reduces your monthly benefit permanently.
- Delaying past full retirement age increases your benefit by about 8% per year up to age 70.
- For married couples, coordinating spousal benefits can create additional planning opportunities.
A strategic approach to Social Security can help you protect longevity risk (the risk of outliving your money.)
4. Use Withdrawal Sequencing to Your Advantage
The order in which you withdraw funds from various accounts can have a big impact on how long your savings last.
A common strategy:
- Withdraw from taxable accounts first.
- Then tap tax-deferred accounts [like 401(k)s and traditional IRAs].
- Lastly, use tax-free accounts (like Roth IRAs).
This approach can help you manage your tax bracket and extend the life of your portfolio. But everyone’s situation is different. Coordinating with a financial advisor or tax planner is key.
5. Consider Guaranteed Income with Annuities
If you’re concerned about market volatility or running out of money, an annuity may offer peace of mind.
Annuities can provide guaranteed income for life, like a personal pension. Options range from:
- Immediate annuities (start income now)
- Deferred income annuities (start later)
- Fixed indexed annuities (offer income with some market-based growth potential)
Not all annuities are created equal, and they’re not right for everyone, but they can be a valuable piece of your income strategy when used appropriately.
6. Build an Income Floor for Essentials
One popular strategy is to cover your essential expenses (housing, food, healthcare) with guaranteed income sources, like Social Security, pensions, and annuities.
Then, use more flexible assets, like investment accounts, to fund your wants and goals (travel, hobbies, gifts).
This “floor-and-upside” approach can provide stability while still offering growth potential.
7. Adjust for Inflation and Healthcare Costs
Retirement can last 20–30 years or more and your income plan should account for rising costs. Make sure to:
- Build in inflation protection (consider investments or annuities with cost-of-living adjustments).
- Include healthcare and long-term care planning as part of your budget.
- Revisit your plan annually to adjust as needed.
Final Thoughts: Plan With Purpose
Turning retirement savings into reliable income isn’t just about numbers, it’s about aligning your money with your vision for the future. What do you want retirement to look like? What do you hope to do, give, or experience?
With a thoughtful income plan in place, you can focus less on market movements and more on making the most of this exciting chapter of life living with confidence, clarity, and purpose.
Need Help Creating a Reliable Retirement Income Plan?
Schedule a consultation with our team to design an income strategy tailored to your life, goals, and values. Let’s seek to turn your retirement dreams into a reality.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.
