Whether or not you’ve been good about saving for retirement, have you started thinking about how you’ll manage your money once you get there? How you handle your income in retirement can be just as important, if not more so, than what you have saved. After all, it’s impossible to predict with 100% certainty how long your retirement will last, and you need to make sure you don’t run out of money. Chances are you want to live a comfortable lifestyle, too — you don’t want to merely “get by” — and the cost of future goods and services could be an impediment. To help you on your way, you need a retirement income strategy.

What to consider.

There are so many unknown variables when planning a distribution strategy for retirement funds. The days of relying solely on pension plans and Social Security to meet your retirement-income needs are virtually in the past. In addition, expenses seem to have increased over previous years. Employer-provided health coverage may not be available in retirement for many. What’s more, today people are living longer — and carrying more debt — than in previous generations.

Those are all reasons why it’s important to develop a personal retirement-income strategy. After all, once you retire, you’ll need to shift gears away from saving money to managing the income you’ve accumulated from those prior savings efforts. The challenge is withdrawing enough money to cover your needs without depleting your nest egg too quickly. 

Creating your retirement income plan.

Retirement distribution strategies are unique to each individual/couple, taking into account their goals, needs, and ability to handle risk. Without a regular paycheck, you need to create a consistent, sustainable income stream at the lowest cost. You must make sure that your distribution strategy is tax-optimized to avoid paying unnecessary taxes.

Once you retire, you’ll need to shift gears away from saving money to managing the income you’ve accumulated from those prior savings efforts.

To start, you need to understand where your retirement income will come from. Next, you need to determine what your withdrawal strategy will be, and what that means for how long your income will last in retirement. To help you develop a withdrawal strategy that works, consider these five retirement-income risks:

1. Longevity.

The good news is that advances in medical care may help extend your life. However, it could also increase your expenses in retirement. Today, there’s a much larger chance at living much longer than previous generations. But are you prepared to pay for it? You need to account for those extra years in your retirement-income projections.

2. Inflation.

Many people don’t realize inflation can erode the value of their savings. That
$100,000 you have in your retirement account may seem like a lot of money to you today, but what will it be worth in five, 10, 20, or more years? Assuming an annual inflation rate of 3.5%, in 20 years that $100,000 may only get you half as much as it does today.1

3. Healthcare costs.

Healthcare can be one of the biggest expenses in retirement. A couple who retired at age 65 in 2017 may need as much as $370,000 to cover healthcare expenses in retirement, according to one study by the Employee Benefit Research Institute.2

4. Investment risks.

Poor market performance early in your retirement can significantly impact how long your savings will last. A properly diversified portfolio — in other words, dividing your savings between different investments from various asset classes — can help you manage market risk. A financial advisor can help you explore optional retirement income services, designed to provide you with a steady stream of income while also allowing you to participate in the growth of the market.

5. Public policy.

Tax reform, evolving healthcare policies, or changes in programs like Social Security, Medicare and Medicaid can all have a significant impact on your retirement income. Though shifts in public policy are out of your control, there are things you can do to help prepare. For example, consider diversifying your tax treatment by using both traditional and Roth IRA accounts.

These are big and complicated decisions, but you don’t have to do it on your own. If you’re looking for more help, consider making an appointment with an advisor to learn more about retirement income services and ways to plan for and provide a monthly income during retirement.

1Observations, Future Inflation Calculator. Retrieved February 26, 2018 from
Savings Medicare Beneficiaries Need for Health Expenses: Some Couples Could Need as Much as $370,000, Up from $350,000 in 2016. Paul Fronstin, Ph.D., and Jack VanDerhei, Ph.D., Employee Benefit Research Institute, December 20, 2017, Vol 38, No. 10.