How to Create a Reliable Retirement Income Plan That Designed to Last

 

Retirement planning involves more than building savings—it’s about creating a strategy to turn those savings into sustainable income. With longer life expectancies, many individuals are concerned about making their retirement income last. Developing a well-structured retirement income plan can help provide financial confidence and support your goals throughout retirement.

Step 1: Estimate Your Retirement Expenses

A reliable income plan starts with understanding your future expenses. Consider:

  • Basic living costs (housing, food, transportation)
  • Healthcare expenses (insurance premiums, co-pays, out-of-pocket costs)
  • Leisure activities (travel, hobbies, entertainment)
  • Inflation adjustments to account for rising prices

Tracking and projecting expenses can help set an income target. While a common guideline suggests needing 70–80% of pre-retirement income to maintain your lifestyle, individual needs may vary depending on your goals and circumstances.

Step 2: Identify Guaranteed Income Sources

Guaranteed income provides a stable foundation for covering essential expenses. Identify your sources of reliable income, such as:

  • Social Security benefits
  • Pension payments (if applicable)
  • Annuities offering lifetime income options

Ideally, guaranteed income should cover your basic living expenses, reducing reliance on market-based investments for essentials.

Step 3: Use Investments to Bridge the Gap

Once you’ve identified guaranteed income sources, assess how to cover any remaining expenses using your savings and investments. Possible sources may include:

  • Withdrawals from 401(k)s or IRAs
  • Dividends from stocks or mutual funds
  • Interest income from bonds or certificates of deposit (CDs)

A diversified portfolio that aligns with your risk tolerance and time horizon can help balance stability and growth. As retirement approaches, you may consider shifting toward more income-focused investments.

Step 4: Establish a Withdrawal Strategy

A sustainable withdrawal strategy is critical to making your savings last. Withdrawing too much early on could deplete resources over time. One commonly referenced guideline is withdrawing 4% annually, though this approach may not fit every situation.

Considerations for a withdrawal strategy include:

  • Market fluctuations and inflation
  • Adjusting withdrawals annually based on performance or expenses
  • Exploring lower withdrawal rates for added flexibility

A financial professional can help tailor a strategy to fit your needs and changing conditions.

Step 5: Plan for Required Minimum Distributions (RMDs)

Starting at age 73, Required Minimum Distributions (RMDs) must be taken from traditional IRAs and 401(k)s. These withdrawals are taxable as ordinary income and may affect your tax bracket or Medicare premiums.

Incorporate RMDs into your plan by:

  • Calculating how RMDs fit into your overall income strategy
  • Using RMDs to fund expenses or reinvesting them in taxable accounts
  • Considering Roth conversions before RMD age to manage future taxable income

Step 6: Protect Against Inflation and Longevity Risk

To support income over an extended retirement, your plan should account for inflation and the possibility of living longer than expected. Strategies may include:

  • Including inflation-protected investments such as Treasury Inflation-Protected Securities (TIPS)
  • Delaying Social Security to increase your benefit amount
  • Exploring longevity annuities that provide income starting at a later age

These measures can help maintain purchasing power and provide additional income if you live longer than planned.

Step 7: Consult a Financial Professional

A qualified financial professional can assist in creating a personalized retirement income plan by evaluating your income sources, tax situation, and investment strategy. They can recommend approaches to balance guaranteed income, withdrawals, and tax considerations to support your financial goals.

Conclusion

Retirement income planning involves more than saving—it requires a thoughtful strategy that considers income sources, withdrawals, taxes, and investment risk. By taking proactive steps and reviewing your plan regularly, you can work toward building an income stream designed to support your needs throughout retirement. Consulting with a financial professional can provide additional insights tailored to your situation.

FAQ

How much income will I need in retirement?

Many individuals aim for 70–80% of their pre-retirement income to maintain their lifestyle, though actual needs depend on expenses, goals, and healthcare considerations.

What are common sources of guaranteed retirement income?

Social Security, pensions, and certain types of annuities are common sources of guaranteed income in retirement.

How can I reduce the risk of outliving my savings?

Using a sustainable withdrawal strategy, diversifying investments, and incorporating guaranteed income sources can help manage this risk.

Should I delay Social Security benefits?

Delaying Social Security can increase your monthly benefit; this option may be beneficial if you expect a longer retirement or have other income sources early in retirement.

How does inflation affect my retirement income?

Inflation reduces purchasing power over time. Including inflation-adjusted investments and delaying Social Security may help protect against inflation’s impact.

Disclaimer: This is not intended to offer or deliver investment advice in any way. Different types of investments involve varying degrees of risk. BML Wealth Management is not qualified to render any legal or accounting advice. Please contact us for further information on our services