For decades, you played the same game: earn, save, repeat. You resisted the siren call of the boat you didn’t need, the kitchen remodel that probably could have waited, and those “can’t-miss” investment opportunities from your brother-in-law. Now you’re nearing retirement, and the rules have changed. The goal is no longer to grow the pile. It’s to live off it. That shift sounds simple, but for many people it’s genuinely disorienting. There’s no more paycheck reliably hitting your account. Just you, your savings, and the question: Will this actually work?
The short answer is yes, with a plan. Here’s how to build one.
Start with what you’ve already earned.
Before you touch a single dollar of your investment portfolio, take stock of the income you’ve already locked in.
Social Security is the obvious starting point. When you claim it matters. It’s one of the most impactful decisions you’ll make in retirement. Claim early and you permanently reduce your monthly benefit. Wait until 70 and it grows meaningfully each year you delay. There’s no universal right answer on timing. It depends on your health, your other income sources, your spouse’s situation, and, whether you actually want to wait. Work with an advisor to model it out.
A pension, if you have one, is an extremely reliable source of income, showing up every month no matter what the market is doing. If you’re among the fortunate retirees with a pension, layer it in alongside Social Security before drawing down anything else. The more guaranteed income you have at the base, the less pressure you put on your investment portfolio during volatile markets.
The annuity question (it’s complicated).
Once you’ve accounted for Social Security and any pension, many retirees still have a funding gap between guaranteed income and what they actually need to live the way they want. One tool people can use to fill that gap is an income annuity. Essentially, you hand an insurance company a lump sum, and they promise to send you a check for the rest of your life, or for a set period of time.
Knowing a certain amount of money will arrive every month, regardless of what the markets are doing, can be genuinely reassuring. If the idea of outliving your money keeps you up at night, some form of guaranteed income might be worth exploring.
That said, annuities are not for everyone. They can carry meaningful fees. They often limit your access to the money you’ve committed. Some leave little or nothing to your heirs unless you pay for add-on features. The contracts can also be very complex. Know what you’re getting into before signing anything.
Putting your portfolio to work.
Your investment portfolio is an active participant in funding your retirement. Here’s how most retirees put it to work:
Dividends and income-producing investments. Dividend-paying stocks and active/passive investment funds can generate regular cash flow while still leaving room for long-term growth. Just know that dividends aren’t guaranteed. Companies can reduce or eliminate them, especially during economic stress.
Bonds, CDs, and bond ladders. These options tend to be more predictable. A bond ladder, where bonds mature at staggered intervals, can give you periodic access to cash while managing interest rate risk.
Systematic withdrawals. This is the approach most retirees end up using. You keep a diversified portfolio and withdraw from it on a regular schedule. The classic rule of thumb (withdraw no more than 4% per year) has been refined considerably over time, but the core idea holds: structure your withdrawals intentionally and let the rest of your portfolio keep working.
A well-constructed retirement income plan typically layers all three of these strategies. No single strategy should carry all the weight.
Don’t forget about inflation.
Here’s the part people tend to underestimate. What costs $5,000 a month today will cost considerably more in 20 years. Even mild inflation compounds quietly in the background, slowly eroding your purchasing power whether you pay attention to it or not. This is why retirement income planning is about covering today’s expenses and building a portfolio that keeps pace with rising costs over the long haul.
Review your plan. Then review it again.
Markets move. Tax laws change. Healthcare costs surprise you. Spending in year three of retirement may look nothing like year fifteen. Your retirement income plan needs tending after it’s created. What worked well when you were 65 may need adjusting when you’re 71. Meet with your advisor annually to make adjustments as needed.
A dependable retirement income stream is built by stacking smaller, complementary strategies: guaranteed income at the base, investment withdrawals for flexibility, and growth to keep inflation at bay. If we can be of any guidance as you prepare your retirement income plan, don’t hesitate to reach out.
Frequently asked questions.
How much income will I need in retirement?
It depends entirely on how you want to live. Most people find their spending shifts in retirement. A good starting point is building a realistic monthly budget before you retire, then pressure-testing it with your advisor. The goal is to fund the life you’ve planned for, not to spend as little as possible.
Is it better to live off interest and dividends alone?
Not necessarily, and for most people, it’s not practical. A total return approach, which draws on a mix of growth, dividends, interest, and planned withdrawals, tends to be more flexible and more effective over time. Trying to live purely off investment income often means taking on more risk than you realize in pursuit of yield.
Should I delay claiming Social Security?
Delaying can meaningfully increase your monthly benefit, but it’s not automatically the right call. Your health, life expectancy, other income sources, retirement date, and your spouse’s situation all factor in. This decision is worth modeling carefully. The difference between claiming at 62 versus 70 can be substantial over a long retirement.
How often should I review my retirement income plan?
At least once a year, and whenever something significant changes. A plan that made perfect sense when you retired at 65 may need a tune-up at 70.
Disclaimer: The information above is for general educational purposes only and should not be considered financial, tax, or legal advice. Always consult with a qualified professional regarding your specific situation. You should consult with your CPA and/or attorney before implementing any estate planning, gifting, or tax-related strategy.