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You’ve spent decades contributing to your retirement accounts, watching your nest egg grow. But now what?
As retirement approaches—or has already arrived—many people find themselves asking the same crucial question:
“How do I turn my savings into income I can rely on?”
Unlike a paycheck that arrives every two weeks, retirement income doesn’t just show up. It requires careful planning, smart withdrawal strategies, and a deep understanding of taxes, inflation, and market risk. Without a clear approach, you could run out of money too soon—or miss out on enjoying what you’ve worked so hard to build.
In this blog, we’ll explore how to convert your retirement savings into a reliable income strategy—one that helps ensure your money lasts as long as you do. Whether you’re five years from retirement or already there, these insights can help you live with more freedom, flexibility, and financial confidence.
The Shift from Accumulation to Distribution
During your working years, your focus was likely on saving and growing your retirement accounts. You made contributions, picked investments, and hoped for good returns. This was the accumulation phase.
But once you retire, the game changes.
Now you’re in the distribution phase—where the goal is to strategically draw income from your savings in a way that’s sustainable, tax-efficient, and aligned with your lifestyle goals.
This is a very different skill set. Investing aggressively may have worked during accumulation, but now your priority shifts to preserving capital, generating steady income, and protecting against longevity and market risk.
That’s why a reliable income strategy is essential.
Step 1: Know Your Retirement Income Needs
The first step is understanding how much income you’ll need each year in retirement. This includes both:
Essential expenses: Housing, food, utilities, insurance, healthcare
Lifestyle expenses: Travel, hobbies, gifts, dining, entertainment
A common rule of thumb is that retirees need 70%–80% of their pre-retirement income, but your actual number depends on your unique goals, health status, and living situation.
Once you know your target income, you can subtract any guaranteed income sources, such as:
Social Security
Pension income
Annuities with lifetime guarantees
Rental income
The gap between your desired income and these guaranteed sources? That’s what your savings need to cover.
Step 2: Diversify Income Sources
To build a truly reliable retirement income strategy, it’s smart to diversify the types of income you draw from, including planning for your annual retirement income funds and income. Think of your income like a stool—it’s more stable when it rests on multiple legs, especially if you invest a portion of your portfolio wisely, following the principles of asset allocation.
Some common retirement income sources include:
Social Security Benefits
For most Americans, the Social Security Administration indicates that Social Security is a foundational income source in retirement. Timing your claim can significantly impact the benefit amount. For example, delaying until age 70 increases your monthly benefit by up to 32%.
Tip: Work with a financial advisor to optimize your Social Security claiming strategy. For couples, spousal coordination can make a big difference in long-term income.
Withdrawals from Retirement Accounts (401(k), IRA, etc.)
These are likely your largest retirement savings vehicles. But withdrawing too much—or too little—can trigger tax issues or income shortages.
A well-structured withdrawal plan helps:
Minimize taxes
Avoid early withdrawal penalties or RMD mistakes
Create consistent income without eroding your principal too fast
Roth Accounts
Roth IRAs and Roth 401(k)s offer tax-free withdrawals in retirement (if requirements are met). These are powerful tools for managing tax brackets and creating flexible, tax-efficient income.
Strategy: Consider using Roth accounts in years where market downturns or low income allow you to stay in a lower tax bracket.
Annuities
Annuities can provide guaranteed lifetime income, much like a pension. Some people use annuities to cover essential living expenses so that their investment accounts can remain more growth-oriented.
There are many types of annuities—fixed, variable, immediate, indexed—so it’s important to choose carefully based on your goals and risk tolerance.
Step 3: Choose a Withdrawal Strategy
Now that you’ve identified income sources, it’s time to determine how much to withdraw—and from where. A thoughtful strategy is key to making your money last.
Common withdrawal approaches include:
The 4% Rule
This traditional rule suggests withdrawing 4% of your retirement savings in the first year, then adjusting for inflation. For example, with $1 million saved, you’d withdraw $40,000 in year one.
Pros: Simple to follow
Cons: Doesn’t consider taxes, market timing, or rising healthcare costs
Bucket Strategy
Divide your savings into three “buckets” based on time horizon:
Short-term bucket (1–3 years): Cash, CDs
Mid-term bucket (3–7 years): Bonds, fixed income
Long-term bucket (7+ years): Stocks, growth-oriented investments
You withdraw from the short-term bucket while the others continue to grow, replenishing as needed.
Pros: Helps manage market risk and cash flow
Cons: Requires rebalancing and long-term planning
Step 4: Minimize Taxes
Taxes don’t stop in retirement— and if you’re not careful, they can take a big bite out of your income.
Here are a few tax-savvy strategies to consider:
Tax Diversification: Withdraw from tax-deferred, tax-free, and taxable accounts in a coordinated way to manage your annual tax bracket and avoid spikes in income.
Roth Conversions: Convert traditional IRA funds into a Roth IRA during lower-income years to reduce future RMDs and create tax-free income later.
Manage RMDs: Starting at age 73 (if born between 1951–1959), you must begin Required Minimum Distributions from most retirement accounts. These are taxable and can push you into higher brackets.
Planning ahead—such as withdrawing earlier or converting to Roth—can help reduce this impact.
Use Capital Gains Wisely: In taxable accounts, long-term capital gains may be taxed at lower rates—or even 0%—if your income is within certain thresholds.
Step 5: Prepare for Inflation and Healthcare Costs
Your income strategy must be designed to outpace inflation. If your income doesn’t grow over time, your purchasing power will shrink.
Key tools to fight inflation:
Social Security (with annual COLA increases)
Equities (long-term stock growth)
Real assets like real estate
Inflation-protected securities (TIPS)
Healthcare costs are another major concern. According to Fidelity, the average 65-year-old couple, considering life expectancy, retiring in 2024 can expect to spend over $315,000 on healthcare during their years of retirement.
Be sure to factor in:
Medicare premiums
Medigap or Advantage plans
Long-term care insurance or alternative funding options
Step 6: Reevaluate and Adjust Regularly
Retirement isn’t a one-and-done plan. Life changes. Markets shift. Laws evolve. That’s why your income strategy should be reviewed annually and adjusted as needed.
Are your withdrawals sustainable?
Have your expenses increased or decreased?
Are there new tax opportunities this year?
Have your investment allocations drifted?
Working with a fiduciary financial advisor helps ensure your income plan adapts with your life.
The Goldstone Approach to Retirement Income Planning
At Goldstone Financial Group, we believe retirement is about freedom, not fear. Our mission is to help you enjoy the fruits of your labor with confidence, clarity, completeness, and security.
We work with each client to build a custom retirement income plan that balances:
Guaranteed and flexible income sources
Smart tax strategies
Risk tolerance and longevity planning
Healthcare and inflation considerations
Lifestyle goals and legacy wishes
Whether you’re nearing retirement or already there, we’re here to guide you through every step—from accumulation to distribution—so you can focus on living the life you’ve earned.
You’ve saved for years—now it’s time to make your money work for you. Schedule a consultation with a registered investment adviser and fiduciary advisor at Goldstone Financial Group and discover how to turn your retirement savings into a reliable, tax-efficient income strategy and specific advice investment strategy that lasts a lifetime.
