Turning savings into income you won’t outlive

When you’re working, your paycheck is the plan. In retirement, you become the source of your paycheck. The question changes from “How much have I saved?” to “How do I turn what I’ve saved into steady, reliable income for the next 25 or 30 years?”

The pieces of a retirement income plan

• Your essential expenses — housing, food, healthcare, insurance. Ideally these are covered by dependable income.
• Your dependable income sources — Social Security, any pension, and income you may create with tools designed for lifetime income.
• Your flexible assets — investments used for travel, gifts, and the unexpected.
• Your safety margin — cash reserves so you aren’t forced to sell investments at a bad time.

Sequence-of-returns risk

Two retirees can earn the same average return over 20 years and end up in very different places — simply because of when the good and bad years happen. A sharp market drop in the first few years of retirement, while you’re also withdrawing money, can do lasting damage. This is called sequence-of-returns risk, and planning for it is one of the most important — and most overlooked — parts of retirement income.

A calm way to start

Start by estimating what retirement actually costs each month. Then look at which of those costs are covered by dependable income versus which rely on market performance. That single comparison often brings a great deal of clarity.