Retirement isn’t just about how much you’ve saved. It’s about turning those savings into income you can rely on. A thoughtful income strategy can help you prepare for your expenses, Social Security, inflation, and the lifestyle you want throughout retirement.
Saving for retirement is only part of the equation. The next question is whether those savings can provide the income you need once the paycheck stops.
For many people, retirement marks a major shift in how money flows. Instead of earning a regular paycheck and adding to your savings, you begin relying on Social Security, investments, and other income sources to help cover your everyday expenses.
That’s where an income gap can appear. Your income gap is the difference between the income you expect to receive in retirement and the amount you actually need to maintain your lifestyle. Understanding that gap can help you determine how much income your savings may need to generate throughout retirement.
YOUR RETIREMENT INCOME GAP
Monthly Expenses
− Expected Retirement Income (ex. Social Security, Pension, Annuity, etc)
= Income Your Savings Need to Provide
Did You Know?
Only 35% of non-retirees surveyed by the Federal Reserve view their retirement savings plan as being on track.
Source: Federal Reserve
During your working years, the goal is often to save and grow your money.
Retirement reverses that flow. Your savings may now need to help generate the income that once came from your paycheck.
That transition can make retirement income more complicated than simply deciding how much to withdraw each month. Where your income comes from, when you take it, and how your assets are positioned can all play a role in your overall strategy.
Income By Account Type
Coordinate withdrawals across tax-deferred, taxable, and Roth accounts with the goal of using each type of money effectively.
Guaranteed Income
Use reliable income sources to help cover essential living expenses while allowing other assets to remain available for growth or future needs.
Time-Based Income
Separate assets based on when you expect to need them, with near-term money positioned differently from money intended for later in retirement.
Principal & Interest
Structure a portion of assets around generating income while seeking to preserve principal, taking available interest rates and income needs into consideration.
The right strategy may not be just one of these approaches. Your retirement income plan can incorporate different strategies based on your needs, resources, time horizon, and overall financial picture.
Retirement income rarely comes from just one place. A retirement income strategy may bring together several resources, each serving a different purpose within the overall plan.
Social Security >
A foundational source of retirement income that can be coordinated with other assets and income needs.
Pensions & Other Guaranteed Income >
Employer pensions and other reliable income sources can help cover a portion of ongoing retirement expenses.
Savings & Investments >
401(k)s, IRAs, Roth accounts, brokerage accounts and other savings can be strategically used to create income throughout retirement.
Annuities >
Certain annuities can provide a predictable source of income, including options designed to provide income for life. The role an annuity may play depends on the type, its features, and how it fits with the rest of the retirement plan.
Your income needs may change throughout retirement. Inflation, unexpected expenses, health care costs, and changes in your lifestyle can all affect how much income you need in the years ahead.
A retirement income strategy should consider both what you need today and what you may need tomorrow. At Richon Planning, we can help you look at the bigger picture and build an income strategy around your retirement goals, resources, and changing needs.
