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An income plan can help you turn your savings into a retirement paycheck.

“How do I make my money last in retirement?” is one of the most common questions posed to wealth advisors, bankers, and financial advice columnists. The shortest answer is to have a plan for turning your retirement savings into a regular paycheck during retirement.

“What retirement means today is completely different than what it meant five, 10, or 20 years ago,” says Bryan Koepp, Senior Vice President and Wealth Strategist with Regions Private Wealth Management. “As baby boomers ‘retire,’ it generally means they’re just entering the next phase of life. A lot of people want to continue being active — whether that’s with family, a business, or philanthropy — and that’s a paradigm shift.”

Also, people are living longer: The average American life expectancy is now 78.6 years, up from 69.7 years in 1960, according to the Centers for Disease Control and Prevention.1 That’s an increase of almost a decade. “It’s not unusual for people to be ‘retired’ for 30, 35 or even 40 years,” Koepp says. “That requires you to ask the question: How do I make my money last for a longer period of time?”

Thanks to unknowns such as health care costs and inflation, answering that question is more difficult than ever.

“When you arrive at retirement, there’s a psychological switch you have to flip,” Koepp says. “Suddenly, you’re not accumulating as much money, if you’re accumulating any at all. So you have to ask: How do I generate income to meet the needs and wants that I have? That’s where strategic income planning comes in.”

List Your Resources

Your spending constitutes one side of the income planning coin. Your income sources constitute the other side, according to Koepp, who says you should make a comprehensive list of all your retirement assets. He calls this your “life portfolio,” and it should include:

  • Benefits you earned from working, such as a pension from your employer and Social Security from the government.
  • Investments, including qualified retirement plans, such as 401(k) plans, 403(b) plans, 457 plans, and IRAs, as well as nonqualified investments, such as annuities, stocks, bonds, and even collectibles such as art, jewelry, and antiques.
  • Miscellaneous income, such as paychecks from a part-time job or distributions from a family trust.

“The best thing to do is create, in essence, a net worth statement,” Koepp says. “That way you’ve got a central depository that tells you what your assets are, which gives you the best chances of putting the whole puzzle together efficiently.”

Define Your Needs

Although income is all about inflows, income planning should include a conversation about outflows, according to Koepp. “People a lot of times get fixated on a number. They’ll say, ‘If I just have $1 million for retirement, I’ll be OK.’ But that’s only part of the equation,” he says. How much of those funds, for instance, produce income without your needing to withdraw principle?

“You really need to determine whether the income you get from that $1 million is enough for the goals and objectives that you have,” Koepp says. “That requires you to think about what’s most important to you and what you want to achieve.”

Maybe you want to travel. Maybe you want to spend time with your grandchildren. Maybe you want to start a post-retirement business. Whatever it is, you have to be really specific about your goals — and what they cost — so you can design your retirement income plan around them.

Use our retirement calculator to help you determine how much you should save for retirement.

“When you’re accumulating money in your 30s, 40s, and 50s, you have the ability to say, ‘I’ll put more money away next year’ because you know there’s more money coming in,” Koepp explains. “But when you reach retirement, usually what you have is what you have. There is no ‘next year.’ The future is now. You have to focus on what you want the next 10, 20, 30 years to look like so you can make sure there are no gaps.”

Determine Your Withdrawals

If income planning is an equation, the next step is doing the math — determining how much income you can actually extract from your assets on a monthly or annual basis. This requires taking into account not only the current size of your assets, but also circumstances that might impact their future size, such as market downturns, taxes, and inflation. A wealth planning professional can help you not only forecast future income from your assets, but also schedule and sequence withdrawals in ways that minimize taxes and preserve asset growth.

“You want to put everything together in what is essentially a retirement cash flow analysis,” Koepp says. “That allows you to pinpoint any potential worries or pitfalls and to add inflation as an adjuster to see if the math works or not.”

Correct Your Course if Needed

Ultimately, the objective of income planning isn’t analysis, it’s action. If you discover through income planning that you won’t be able to generate enough income from your assets to achieve the goals you have for retirement, there’s still time to fill the gaps — even if you’re already retired.

“There’s always an opportunity,” says Koepp. “You as an individual need to take charge of your financial situation by being honest with yourself about what’s most important to you and what quality of life you want to have. If you fall behind or come up short, you need to talk to professionals to find out how you can get to where you want to be. Don’t give up, though. Never give up.”

Now that you know the income planning basics, find out more about withdrawal strategies in retirement.

1. “United States Life Tables, 2017.” Centers for Disease Control and Prevention. 2019.
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