Have you ever asked yourself, “How do I shift from years of saving to now spending what I’ve saved?” This is one of the biggest transitions in retirement, and it’s where creating a retirement income plan becomes essential.
Retirement is one of the biggest life transitions anyone can make. It’s a new phase of life with vastly different financial dynamics from the decades of hard work that preceded it. You’re no longer earning a paycheck, which means the responsibility for funding your lifestyle shifts to the assets you’ve accumulated. For many Americans, social security only covers a portion of their normal expenses.
That’s why creating a thoughtful, flexible retirement income plan is one of the most important steps you can take to help you approach retirement with greater clarity in the years ahead. This blog outlines five steps you may want to consider to help make that transition as smooth and sustainable as possible.
1. Create a Flexible Retirement Budget
Before you retire, you need a clear understanding of how much you plan to spend. One of the most valuable exercises is tracking your current cash flow and projecting your expenses in retirement.
A simple yet effective method is to divide your expenses into two categories: fixed (like housing, insurance, and utilities) and variable (such as travel, dining out, and entertainment). This breakdown gives you a strong starting point to understand your retirement spending.
Spending also evolves over time. Many retirees go through what are commonly called the Go-Go, Slow-Go, and No-Go Years:
- Go-Go Years – The early years of retirement when you’re active, healthy, and spending more on travel and new experiences.
- Slow-Go Years – A time when activity slows down and spending may decrease, often due to having already checked off many bucket list items.
- No-Go Years – In later retirement, priorities shift toward comfort, health care, and staying close to home.
Building your budget with these life phases in mind can help you plan realistically for changing financial needs over time.
2. Identify Your Income Sources
Once you understand your spending, the next step is figuring out where your income will come from. You’ll likely draw from a mix of sources:
- Social Security
- Pension (if applicable)
- Retirement accounts like 401(k)s or IRAs
- Rental or business income
- Investment portfolios
Clarify what each source provides, when it begins, and how reliable it is. Creating a timeline of these income streams can help reduce the likelihood of cash-flow gaps.
3. Apply a Sustainable Withdrawal Strategy
One of the most frequent questions retirees ask is: “How much can I safely withdraw from my portfolio each year?” A commonly cited rule is the 4% Rule, which suggests that withdrawing 4% of your portfolio annually can support a long-term retirement.
While this rule can be a useful benchmark, a more dynamic approach is often better. When markets perform well, you may be able to take a bit more. When markets decline, scaling back temporarily can protect your portfolio’s longevity. Flexible withdrawal strategies may help support long-term sustainability and provide a sense of financial control.
4. Consider the Tax Impact of Distributions
Taxes don’t stop in retirement. In fact, they often become more complex. Retirement distributions may come from accounts with different tax treatments, like traditional IRAs (tax-deferred), Roth IRAs (tax-free), or taxable brokerage accounts.
One powerful tool is the Roth conversion. This strategy allows you to move money from a traditional IRA into a Roth IRA, paying taxes now so the money can grow and be withdrawn tax-free later—when certain conditions are met.
Strategically converting portions of your IRA over time, especially in years with lower income, may reduce your overall tax liability over time, depending on your specific financial situation. Working closely with a financial advisor or CPA to coordinate distributions and conversions can help you optimize for tax efficiency.
5. Align Income Planning With Your Personal Priorities
Perhaps the most overlooked part of income planning is understanding the “why” behind your money. Too often, investors focus on the numbers—budgets, portfolios, withdrawal rates—without clarity on what that money is actually for.
Take time to reflect on what you want your retirement to look like. What brings you joy? What experiences, causes, or people matter most? Money is a tool to help you live out your values. A thoughtful retirement income plan should align with the life you want to live.
5 Actionable Steps to Get Started:
- Build a flexible, year-one retirement budget and project it forward, accounting for inflation.
- Map out all of your income sources. Create a timeline showing when each one starts and how stable it is.
- Choose a sustainable withdrawal strategy. Start with a baseline percentage and adjust annually based on market and personal factors.
- Coordinate with your tax professional to create a tax-efficient withdrawal plan—including considering Roth conversions.
- Make sure your distribution plan supports the life you envision.
A thoughtful retirement income plan can provide greater direction and a financial strategy that supports what matters most to you.
If you’d like to learn more about how we can help you build your plan, schedule a consultation using the link below:
Contact – Moran Wealth Management
The content on this page and/or video is for educational purposes only and should not be construed as investment advice. Specifically, the content is intended to provide education and tools for individuals looking to handle their retirement planning on their own. Should you need personalized investment advice, you should consult with a registered investment adviser. Any communications on this page with other individuals that are not associated with Moran Wealth Management, LLC are done voluntarily by users and are unsupervised and unaffiliated with Moran Wealth Management, LLC and Moran Wealth Management, LLC has no responsibility or liability over any discussions or advice that may be given. Moran Wealth Management, LLC is a registered investment adviser and can provide investment advice. If you are interested in Moran Wealth Management, LLC’s advisory services, you can contact us at 239-920-4440 or info@moranwm.com.
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