For decades, your financial life revolves around accumulation—growing your 401(k), funding your IRA, and building your investments. Then, one day, the script flips. Suddenly, you have to transition from a saver to a spender, a mental shift that can be surprisingly difficult. This is where many people feel uncertain. How do you make your money last for 30 years or more? Effective income planning for retirement is the bridge between these two mindsets. It provides a clear, actionable strategy for drawing down your assets, coordinating Social Security benefits, managing taxes, and creating a predictable income stream so you can spend with confidence, not constant worry.
Key Takeaways
- Shift from a Saver’s Mindset to a Spender’s Strategy: Reaching your savings goal is just the start. A true retirement income plan maps out how you’ll convert those assets into a steady paycheck, accounting for your desired lifestyle, healthcare costs, and taxes to make your money last.
- Build a Diversified and Tax-Smart Income Stream: Relying on a single source of income is risky. A resilient plan draws from multiple places—like 401(k)s, IRAs, and Social Security—and uses a strategic withdrawal sequence to minimize your tax bill and keep your investments working for you.
- Your Plan Must Be Flexible to Succeed: Retirement can last for decades, and life will inevitably change. The most effective plans are adaptable, allowing you to adjust for market swings, inflation, and personal goals through regular reviews and a flexible investment mix.
What Is a Retirement Income Plan (and Why Do You Need One)?
Think of a retirement income plan as the blueprint for your financial life after you stop working. While saving for retirement is about accumulating your nest egg, an income plan is the strategy for how you’ll turn that nest egg into a steady, reliable paycheck to cover your expenses. It’s your personal roadmap for managing withdrawals, planning for taxes, and making your money last for the rest of your life.
Without a plan, you’re essentially navigating your retirement years by guessing how much you can safely spend. This can lead to anxiety and the risk of either spending too quickly or being so conservative that you don’t get to enjoy the life you worked so hard to build. A well-structured plan answers the most important questions: How much can I withdraw each year? When should I claim Social Security? How can I minimize my tax burden? By creating a clear strategy, you give yourself the confidence and freedom to focus on what truly matters in retirement. It’s about shifting from a savings mindset to a sustainable spending mindset, ensuring your financial resources support your lifestyle for decades to come.
Build Your Financial Foundation
At its core, a retirement income plan is designed to make sure your money lasts as long as you do. The goal is to create a sustainable withdrawal strategy that strikes the right balance, allowing you to enjoy your retirement without the constant worry of outliving your savings. This provides a powerful sense of reassurance and security. A solid plan isn’t static; it anticipates rising costs, especially for major expenses like healthcare, housing, and travel. By planning for these future needs, you build a financial foundation strong enough to support you through changing economic conditions and personal circumstances.
Go Beyond Just Saving
Reaching your savings goal is a huge milestone, but it’s only the first step. A retirement income plan goes beyond simply having the funds; it’s a detailed strategy for how you’ll use them effectively. This is where thoughtful financial planning for clients becomes essential. A smart approach helps your savings continue to grow while managing taxes, which can minimize your tax liabilities and maximize your after-tax income. By carefully sequencing withdrawals from different account types—like 401(k)s, Roth IRAs, and brokerage accounts—you can keep more of your hard-earned money working for you, even when you’re no longer working.
How Much Money Do You Need to Retire?
The first question on most people’s minds when planning for retirement is simple: How much is enough? While some financial experts suggest aiming for a specific number, the truth is that your ideal retirement savings goal is entirely personal. It depends on the life you want to live, where you want to live it, and what you want to do with your time.
Figuring out your number isn’t about finding a magical formula. It’s a practical process of looking at your life today and imagining your life tomorrow. By breaking it down, you can move from a vague, intimidating question to a clear, actionable target. The process starts with understanding your current spending habits, then moves to accounting for how your lifestyle will change, and finally involves using tools to project your needs over the long term. This approach turns a big question into a series of manageable steps, giving you a solid foundation for your retirement income plan.
Start with Your Current Expenses
The best place to begin is with what you know: your current spending. Before you can estimate your future needs, you need a crystal-clear picture of where your money goes right now. Start by listing all your monthly and annual expenses. You can do this by reviewing bank and credit card statements from the last six to 12 months to create a realistic budget.
Once you have a complete list, think about how those expenses might change in retirement. Some costs, like daily commuting or saving for retirement itself, will likely decrease or disappear. Others, like property taxes and insurance, may stay relatively consistent. This exercise gives you a concrete baseline to work from, making the next step of projecting future costs much more accurate and less of a guessing game.
Account for Lifestyle Changes and Healthcare Costs
With your current budget as a baseline, you can start thinking about your retirement lifestyle. Do you plan to travel the world, or are you looking forward to more time for hobbies at home? Your withdrawal strategy should anticipate these new or increased costs. While your mortgage might be paid off, you may find yourself spending more on travel, dining out, or activities with family and friends.
More importantly, you must plan for rising healthcare costs. This is one of the largest and most unpredictable expenses for retirees. As you age, your medical needs will likely increase, and it’s critical to factor these potential costs into your plan. A thoughtful financial professional can help you model different scenarios to ensure you’re prepared for both the lifestyle you want and the care you’ll need.
Use Retirement Calculators Wisely
Online retirement calculators can be excellent tools for getting a ballpark estimate of your needs. Reputable sources like Vanguard offer a Retirement Income Calculator that helps you see if your current savings rate is on track to meet your goals. These tools allow you to input your age, income, current savings, and expected retirement age to project your future nest egg.
However, remember that a calculator is only as good as the information you put into it. Use the detailed expense and lifestyle information you’ve already gathered to make your inputs as accurate as possible. Treat the result as a starting point for a deeper conversation, not as a final answer. These tools can show you the path, but working with an advisor helps you refine the map for your unique journey.
Identify Your Retirement Income Sources
A solid retirement income plan pulls from several different places. Think of it less like a single paycheck and more like a collection of streams feeding into a river. Relying on just one source can be risky, so the goal is to build a diverse portfolio of income streams that can support you for decades. Understanding what these sources are and how they work together is the first step toward creating a resilient financial future.
Your personal mix will depend on your career, savings habits, and investment choices. Some streams, like Social Security, provide a baseline. Others, like your 401(k) or personal investments, are accounts you’ve actively grown over the years. You might even plan for part-time work or rental income. By identifying each potential source now, you can see the full picture and start thinking about how to draw from them strategically when the time comes. This process helps you move from simply saving money to building a real, functional income plan.
Social Security
For most people, Social Security is a foundational piece of their retirement income, but it’s important to have realistic expectations. On average, these benefits only replace about 37% of a person’s past earnings, and many retirees find the monthly amount is less than they anticipated. It’s best to view Social Security as a reliable supplement to your other savings, not your entire plan. You can get a personalized estimate of your future payments by creating an account on the Social Security Administration’s website. This will give you a clearer idea of what to expect and help you plan more accurately for any income gaps you’ll need to fill.
401(k)s, 403(b)s, and Pensions
Your workplace retirement accounts, like a 401(k) or 403(b), are often the heavy lifters in your savings strategy. These plans allow you to contribute pre-tax dollars that grow tax-deferred over time. If you’re lucky enough to have a pension, that provides a defined monthly payment. When it’s time to start using these funds, a common guideline is the 4% rule, which suggests withdrawing 4% of your savings in your first year of retirement and adjusting for inflation after that. For example, with a $1 million portfolio, you’d withdraw $40,000. This is a starting point for thinking about retirement withdrawal strategies, not a rigid rule to follow.
Traditional and Roth IRAs
Individual Retirement Accounts (IRAs) are another powerful tool for building wealth. The main difference between a Traditional IRA and a Roth IRA comes down to taxes. With a Traditional IRA, you contribute pre-tax dollars and pay income tax on withdrawals in retirement. With a Roth IRA, you contribute after-tax dollars, and your qualified withdrawals are tax-free. A smart approach is to consider your income each year. You might contribute more to Roth accounts in lower-income years and then focus on tax-deferred accounts like a Traditional IRA in higher-income years. This can help you create tax-efficient retirement income down the road.
Personal Investments and Savings
Beyond your dedicated retirement accounts, you may have other assets like a taxable brokerage account, mutual funds, stocks, or even real estate. These personal savings offer flexibility, as they don’t have the same withdrawal rules as IRAs or 401(k)s. However, it’s important to manage them with a tax-aware plan to preserve more of your income. Withdrawing too much from your portfolio during a market downturn, especially early in retirement, can significantly reduce its longevity. A thoughtful investment approach helps protect your assets while generating the income you need.
Part-Time Work and Other Income Streams
Retirement doesn’t have to mean stopping work entirely. Many people choose to work part-time, consult, or start a small business to stay active and generate extra cash flow. This can reduce how much you need to withdraw from your savings, allowing your investments to continue growing. Your financial plan isn’t static; it should adapt to your life. Market conditions, health, and personal goals can all change. That’s why it’s a good idea to schedule annual reviews with a financial advisor to assess your income sources and make sure your plan still aligns with your needs.
Create a Sustainable Withdrawal Strategy
Once you’ve retired, your focus shifts from accumulating wealth to strategically spending it. A smart withdrawal strategy is the key to making your money last throughout your retirement. It’s not just about how much you take out, but when and from where. By planning your withdrawals, you can manage your income stream, minimize taxes, and give your remaining investments the best chance to continue growing. The goal is to find a balance that lets you enjoy your retirement comfortably without the fear of outliving your savings. Let’s look at a few proven methods for doing just that.
Understand the 4% Rule (and Its Limits)
You’ve probably heard of the 4% rule. It’s one of the most common retirement withdrawal strategies and suggests withdrawing 4% of your portfolio in your first year of retirement, then adjusting that amount for inflation each following year. For many years, this has been a solid rule of thumb. However, it’s not a one-size-fits-all solution. The rule was developed based on historical market data that may not reflect future conditions. Your personal circumstances, lifespan, and major market shifts can all affect whether 4% is a sustainable rate for you. Think of it as a starting point, not a hard-and-fast rule.
Try the “Bucket” Strategy
The “bucket” strategy is a practical way to visualize and manage your retirement funds. This approach divides your retirement investments into three distinct categories, or buckets. The first bucket holds cash and cash equivalents for your short-term needs (1-3 years). The second holds fixed-income investments for your medium-term goals (3-10 years). The third bucket is for long-term growth and contains stocks and other equities. When you need income, you pull from the cash bucket, giving your longer-term investments time to grow without being forced to sell during a market downturn. This structured approach helps align your withdrawals with your financial needs.
Sequence Withdrawals for Tax Efficiency
The order in which you withdraw from your retirement accounts can have a major impact on your tax bill. Following a tax-efficient withdrawal strategy helps you keep more of your hard-earned money. A common approach is to withdraw from accounts in this order: first, taxable accounts (like brokerage accounts); second, tax-deferred accounts (like a traditional 401(k) or IRA); and last, tax-free accounts (like a Roth IRA). This sequence allows your tax-advantaged accounts to continue growing for as long as possible. Of course, your individual situation may require a different approach, but strategic sequencing is essential for preserving your wealth.
Adapt Your Strategy to Market Conditions
Your retirement could last 30 years or more, and markets will inevitably fluctuate during that time. A rigid withdrawal plan that doesn’t account for market volatility can put your savings at risk. A sustainable withdrawal strategy is flexible. This might mean reducing your withdrawals during down years to avoid selling assets at a loss or taking slightly more during years of strong market performance. By staying adaptable, you can protect your principal and ensure your portfolio can support you for the long haul. Regularly reviewing your plan with a financial professional can help you make smart adjustments based on current market conditions and your personal needs.
Decide When to Take Social Security
Choosing when to start receiving Social Security benefits is one of the most significant financial decisions you’ll make for your retirement. It’s not a one-size-fits-all answer, and the right time for you depends on your health, financial needs, family situation, and overall retirement strategy. This single choice will affect the monthly income you receive for the rest of your life, so it’s worth taking the time to understand your options and how they fit into your larger financial picture. Thinking through these scenarios can help you make a choice that supports your long-term goals and provides peace of mind. The key is to move beyond the simple question of “when can I claim?” and instead ask, “when should I claim to best support my retirement plan?”
Weigh Claiming Early vs. Waiting
The core of the Social Security decision is a trade-off: receive smaller payments for a longer period or larger payments for a shorter one. You can start claiming benefits as early as age 62, but your monthly payment will be permanently reduced. If you wait until your full retirement age (which is 67 for most people now), you’ll receive your full benefit amount. By delaying even longer, up to age 70, your benefit increases by about 8% for each year you wait. This means waiting until 70 could give you a monthly check that’s over 75% larger than if you had claimed at 62. You can use the Social Security Administration’s tools to estimate your benefits at different ages to see the real numbers for yourself.
Consider Spousal Benefits
Your Social Security decision doesn’t just affect you; it can also have a major impact on your spouse. Under certain rules, a spouse can claim benefits based on their partner’s work record, which can be a huge advantage if one person has significantly lower lifetime earnings. The amount they can receive depends on when you both decide to file. Coordinating your claiming strategies is essential to maximize your combined household income over your lifetimes. For example, the higher-earning spouse might delay claiming until age 70 to secure the largest possible benefit, which also creates a larger survivor benefit for the remaining spouse. It’s a complex area, so it’s important to explore how spousal benefits could work for your specific situation.
See How It Affects Your Total Income
Social Security is just one piece of your retirement income puzzle. Before making a decision, you need to see how it fits with your other income sources like pensions, 401(k) withdrawals, and investments. Depending on your “combined income,” a portion of your Social Security benefits may be taxable, which can come as a surprise if you haven’t planned for it. Mapping out how this income stream integrates with your withdrawal strategy and tax plan is a critical step. This is where working with financial professionals can add real clarity, helping you model different scenarios to find the optimal path forward for your unique financial life.
Plan for Taxes in Retirement
Taxes don’t stop when you retire—in fact, they can become even more complex. How and when you withdraw money from your various retirement accounts can have a huge impact on your annual tax bill. Creating a thoughtful plan for managing taxes is one of the most effective ways to stretch your savings and keep more of your hard-earned money. By understanding the rules and developing a smart withdrawal sequence, you can keep your tax liability in check and make your retirement income more predictable.
Know Your Account Types: Tax-Deferred vs. Tax-Free
The first step is knowing what kind of accounts you have. Most retirement savings fall into two main buckets: tax-deferred and tax-free. With tax-deferred accounts, like a traditional 401(k) or IRA, you contribute pre-tax dollars and your money grows tax-deferred. You’ll pay income tax on the withdrawals you make in retirement. With tax-free accounts, like a Roth IRA or Roth 401(k), you contribute after-tax dollars, but your qualified withdrawals in retirement are completely tax-free. Because each account is taxed so differently, a tax-efficient withdrawal strategy is critical to preserving your wealth.
Prepare for Required Minimum Distributions (RMDs)
The IRS allows you to grow your money in tax-deferred accounts for decades, but eventually, it wants its share. That’s where Required Minimum Distributions (RMDs) come in. Starting in your 70s, you are required to withdraw a certain amount from most of your retirement accounts (excluding Roth IRAs) each year. These withdrawals are taxed as ordinary income and can push you into a higher tax bracket if you aren’t prepared. While you can typically begin taking penalty-free retirement withdrawals at age 59 ½, RMDs are mandatory. Planning for them ahead of time helps you manage the tax impact and avoid steep penalties for failing to take them.
Manage Your Tax Bracket
One of the biggest goals of a retirement tax plan is to control your taxable income each year. By strategically choosing which accounts to draw from, you can often keep yourself in a lower tax bracket. For example, in a year when you have lower income needs, you might pull from your tax-deferred 401(k). In a year with higher expenses, you could supplement with tax-free Roth IRA withdrawals to avoid a big tax hit. For some retirees, it may even make sense to make tax-savvy withdrawals from taxable brokerage accounts first, especially if they can qualify for a 0% long-term capital gains tax rate.
Prepare for Healthcare Expenses
Healthcare is one of the biggest and most unpredictable expenses you’ll face in retirement. While it’s impossible to know exactly what your future needs will be, you can create a solid plan to handle them. Thinking through these costs now helps protect your retirement savings from being drained by unexpected medical bills down the line. Your withdrawal strategy should anticipate these rising costs, especially since they often increase as you age. Let’s break down the key areas to focus on so you can feel more confident about your financial health in retirement.
Understand Medicare and Its Gaps
Many people assume Medicare will cover all their health needs once they turn 65, but it’s important to understand its limitations. Medicare covers a lot, like hospital stays and doctor visits, but it leaves significant gaps. Things like routine dental, vision, and hearing care are typically not covered. To manage these out-of-pocket costs, you might consider a supplemental plan, like Medigap, or a Medicare Advantage plan. Understanding the different parts of Medicare and what they cover is the first step. Factoring premiums, deductibles, and co-pays for this supplemental coverage into your retirement budget is essential for a realistic income plan.
Plan for Long-Term Care
One of the biggest gaps in Medicare coverage is long-term care. This isn’t just about medical treatment; it’s about assistance with daily activities like bathing, dressing, or eating, whether at home or in a facility. These services can be incredibly expensive and last for years, making them a major threat to your nest egg. Since Medicare doesn’t typically pay for this type of custodial care, you need a separate plan. Options include purchasing long-term care insurance, using a hybrid life insurance policy with a long-term care rider, or setting aside specific funds to self-insure. Planning for these potential long-term care costs early can make all the difference.
Use Your Health Savings Account (HSA)
If you have access to a Health Savings Account (HSA) through a high-deductible health plan, it can be one of the most powerful tools for retirement healthcare savings. An HSA offers a unique triple tax advantage: your contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. Think of it as a dedicated retirement account just for healthcare. By contributing consistently and investing the funds, you can build a substantial balance to cover future medical bills, from Medicare premiums to prescriptions. After age 65, an HSA offers even more flexibility, as you can withdraw funds for any reason, paying only regular income tax, just like a traditional 401(k).
Avoid These Common Retirement Planning Mistakes
Creating a solid retirement income plan is a huge accomplishment, but it’s not a “set it and forget it” task. A few common oversights can derail even the most carefully laid plans. By being aware of these potential pitfalls, you can build a more resilient strategy that stands the test of time and helps you achieve the retirement you envision. Let’s look at three frequent mistakes and how you can steer clear of them.
Underestimating Your Lifespan and Expenses
It’s wonderful that people are living longer, healthier lives, but this longevity means your retirement savings need to stretch further than ever before. It’s also easy to misjudge what your day-to-day life will cost. As New York Life points out, “Underestimating your retirement lifestyle expenses can lead to financial strain.” Think beyond basic needs and consider travel, hobbies, and rising healthcare costs. The best way to counter this is to regularly review your plan. What you wanted at 55 might be different at 75, and your budget should reflect that. A periodic check-in ensures your financial plan stays aligned with your expectations and reality.
Relying on a Single Source of Income
Placing all your financial hopes on one income stream, like Social Security or a single pension, is a risky move. What if benefits are reduced or a company pension plan changes? Diversification isn’t just for your investment portfolio; it’s for your income, too. As financial advisors at Morgan Stanley suggest, you should diversify your income sources in retirement to create more stability. This could mean structuring withdrawals from a 401(k) and an IRA, holding dividend-paying stocks, or even including income from a rental property or part-time work. Creating multiple streams of income provides a crucial safety net, making your financial future much more secure.
Forgetting About Inflation and Market Swings
Your retirement could last 30 years or more, and over that time, the cost of living will rise. A dollar today simply won’t buy as much in 20 years. According to Ameriprise Financial, “Failing to account for inflation can erode your purchasing power over time.” Your income plan must include strategies for growth that can outpace inflation. Similarly, market volatility is a given. A plan that is too aggressive can expose you to losses at the worst possible time, while one that is too conservative may not grow enough. A balanced approach that adjusts over time is key to weathering market swings and preserving your capital.
Keep Your Plan Flexible and Up-to-Date
A retirement plan isn’t a document you create once and file away forever. Think of it as a living roadmap for your financial future. Life is unpredictable—your goals may shift, your family might change, or market conditions can fluctuate. The most successful retirement plans are the ones built to adapt. Staying flexible allows you to respond to these changes thoughtfully instead of reactively, keeping you in control of your financial journey.
This doesn’t mean you need to overhaul your entire strategy every month. It simply means building in checkpoints to ensure your plan still aligns with your life and the future you envision. A plan that can bend without breaking is one that will serve you well for decades to come. By regularly revisiting your approach, you can make small, strategic adjustments that have a major impact over the long term, helping you feel confident as you move toward and through retirement.
Review and Update Your Plan Regularly
Setting aside time to review your retirement plan at least once a year is one of the most important habits you can build. A quick check-in helps confirm that your strategy is still on track and aligned with your expectations. It’s also smart to revisit your plan after any major life event, like a marriage, a new job, or a change in your health. These moments often have financial implications that your plan needs to reflect.
This proactive approach allows you to adapt to new circumstances before they become problems. A regular review gives you the space to ask important questions: Are my savings rates still appropriate? Do my income projections still make sense? Are my goals the same as they were last year? Working with financial professionals can make these reviews even more effective, providing an expert perspective to help you stay the course.
Adjust Your Investment Mix Over Time
The investment strategy that worked for you in your 40s might not be the right fit for you in your 60s or 70s. As you get closer to retirement, your financial priorities often shift from aggressive growth to capital preservation and steady income. This is why it’s so important to periodically adjust your investment mix, or asset allocation, to match your current life stage and risk tolerance.
This process, often called rebalancing, helps you lock in gains and reduce your exposure to market volatility as you near the date you’ll start drawing income. By gradually moving toward a more conservative portfolio, you can better protect the nest egg you’ve worked so hard to build. This flexibility is a key part of extending the life of your retirement savings and giving you peace of mind.
Refine Your Withdrawal Strategy as Needed
Your withdrawal strategy is the engine of your retirement income plan, but it needs regular tune-ups to run smoothly. The amount you plan to withdraw each year should account for the rising costs of living, especially for major expenses like healthcare, housing, and even travel. An unexpected medical bill or a desire to take a big trip can require a temporary adjustment to your spending.
Beyond just covering expenses, a refined withdrawal strategy can also have a significant impact on your tax bill. By carefully choosing which accounts to draw from and when, you can minimize your tax liabilities and maximize your after-tax income. As your financial situation and tax laws change, your withdrawal plan should change, too. You can find more in-depth analysis on market trends and economic shifts in our Research & Insights.
The Right Time to Start Planning Is Now
It’s easy to think of retirement as a distant finish line, but the most effective income plans are built over time, not thrown together at the last minute. Procrastination is the biggest hurdle to a comfortable retirement. Whether you’re decades away or feel like you’re behind schedule, the ideal time to take action is today. A solid plan gives you a clear path forward and the confidence that comes with knowing you’re in control of your financial future.
Starting early allows the power of compounding to work in your favor, while starting later simply requires a more focused strategy. No matter your age, creating a thoughtful plan is the first step toward the retirement you envision.
Getting Started in Your 30s and 40s
When you’re in your 30s and 40s, retirement can feel like a lifetime away. But this is the perfect time to lay a strong foundation. Your greatest asset is time, which allows your investments to grow and recover from market fluctuations. This phase isn’t just about saving; it’s about defining what you want your retirement to look like. Think about what you want to retire to, not just what you’re retiring from. Do you want to travel, start a new hobby, or spend more time with family? Answering these questions now helps you set meaningful financial goals and build a plan that aligns with your vision for the future.
How to Catch Up if You’re Starting Later
If you’re in your 50s or 60s and feel like you’re behind on saving, don’t panic. You still have powerful options to secure your financial future. The first step is to assess where you are and create a focused plan. This might mean increasing your savings rate or planning to work for a few more years. You can also make strategic decisions, like waiting until age 70 to claim Social Security benefits, which can result in a much larger monthly payment. Working with one of Waterloo Capital’s financial professionals can help you create a personalized strategy for investments and retirement income, helping you maintain your purchasing power over time.
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Frequently Asked Questions
What’s the real difference between a retirement savings plan and a retirement income plan? Think of it this way: saving for retirement is like collecting all the ingredients you need to bake a cake. A retirement income plan is the actual recipe that tells you how to combine those ingredients to create something that will sustain you. Your savings plan is focused on accumulation—growing your nest egg. Your income plan is focused on distribution—strategically turning that nest egg into a reliable paycheck that lasts for the rest of your life while managing things like taxes and healthcare costs.
The 4% rule seems simple, but is it really the right approach for everyone? The 4% rule is an excellent starting point for a conversation, but it’s not a universal solution. It was created based on historical market data that may not predict future returns. Your personal situation, including your health, expected lifespan, and retirement lifestyle, plays a huge role. A better approach is to use it as a general guideline and then work with a professional to tailor a withdrawal rate that fits your specific circumstances and provides more flexibility for market ups and downs.
How do I decide which account to withdraw from first in retirement? The order you tap into your accounts can make a big difference in your tax bill. A common strategy is to withdraw from your taxable brokerage accounts first. This allows your tax-advantaged accounts, like your 401(k) and Roth IRA, to continue growing for as long as possible. After that, you would typically move to tax-deferred accounts (like a traditional IRA) and save your tax-free Roth accounts for last. This sequence helps manage your taxable income each year, but your personal situation might call for a different approach.
What’s the biggest mistake people make when planning their retirement income? One of the most common mistakes is underestimating both their lifespan and the impact of inflation. It’s easy to plan for the retirement you can imagine in the near future, but a plan needs to be built to last 30 years or more. Forgetting that the cost of everything from groceries to healthcare will rise over time can seriously erode your purchasing power, forcing you to make difficult choices later in life. A solid plan accounts for a long life and rising costs from the very beginning.
My life and goals might change. How often should I update my retirement plan? Your retirement plan should be a living document, not something you create once and never look at again. A great rule of thumb is to review it thoroughly at least once a year to make sure your assumptions are still accurate and you’re on track. It’s also critical to revisit your plan after any major life event, such as a marriage, the sale of a business, or a significant change in your health, as these events can have a major impact on your financial picture.
