Retirement isn’t just about crossing the finish line. It’s about what comes after. You’ve worked hard and built your savings, and now it’s time to think more about what kind of life that work will create. Let’s take it a step further and explore different sources of income during retirement.
The Shift from Saving to Spending
During your working years, your focus is on building, saving, and growing wealth. In retirement, the focus shifts to using what you’ve built.
- Instead of asking, “How much can I make?” you begin asking, “How long will it last?”
- Your investments, spending habits, and comfort with risk take on new roles.
- Planning ahead is critical to make sure your savings last as long as you do, including strategies for:
- Drawing down your assets efficiently
- Managing taxes effectively
- Adjusting your plan as markets fluctuate
Four Key Risks to Plan For
Several risks can impact your retirement income. Understanding them early helps you plan with confidence:
- Longevity – With people living 30–40 years in retirement, you need a plan that covers daily living, healthcare, and long-term care costs.
- Inflation – Over time, rising costs of groceries, gas, and travel reduce purchasing power. Investments that grow can help protect your lifestyle.
- Taxes – Future tax rates may change, which could impact you negatively. Having both pre-tax and Roth accounts allows flexibility to manage taxes in retirement.
- Market Volatility – The sequence of distributions can shorten your savings when markets drop early in your retirement account. Combining guaranteed income sources (pensions, annuities, Social Security, and cash value life insurance) with investments reduces this risk.
The Three Phases of Retirement
Planning is easier when you understand how your retirement lifestyle and spending may change:
- Go-Go Years – Active phase; travel, hobbies, and family time. Typically the highest spending period.
- Slow-Go Years – Gradually slowing down; less travel but maintaining lifestyle flexibility.
- No-Go Years – Later years; expenses shift toward medical and care-related costs. Planning ahead ensures your savings can support these needs.
The Changing Landscape of Retirement Income
Traditionally, retirement income came from the three-legged stool:
- Pension – Fewer than 7% of people still have access.
- Social Security – Still important but usually not enough alone.
- Personal Savings – IRAs, 401(k)s, and other accounts now make up most income.
However, this has shifted with the reduction of the availability of pension plans and Social Security covering an estimated 40% of the pre-retirement income needs (Statement Insert 25+). Today, planning is becoming more complex, and having an income strategy for using and managing your savings is more important than ever.
Social Security: Timing Matters
Social Security remains a reliable source of retirement income, but timing affects your benefits:
- Start at 62 – the earliest you can claim benefits.
- Full Retirement Age: Age when you can receive 100% of your benefit (based on your birth year).
- Delay until 70 – Benefits do not increase beyond age 70.
- Choosing when to claim depends on your health, financial needs, and family situation.
Traditional vs. Roth: Tax Diversification
Traditional IRA/401(k)
- Contributions before taxes
- Tax deduction now
- Withdrawals taxed as income
- Required minimum distributions apply
Roth IRA/401(k)
- Contributions after taxes
- Withdrawals tax-free later
- No required distributions
- Flexibility for tax planning
Having both account types lets you strategically manage withdrawals and taxes in retirement.
Planning for Market Downturns
Market fluctuations are normal, but withdrawals during downturns can shorten your savings.
Three-bucket strategy:
- Cash Flow Bucket – Covers short-term needs (monthly expenses, Social Security).
- Investment Bucket – Long-term growth assets (IRAs, 401(k)s, individual accounts).
- Protection Bucket – Conservative or guaranteed income sources for stability (annuities, permanent life insurance, bonds, CDs).
This approach helps your growth investments recover while maintaining a reliable income.
Bringing It All Together
Everyone’s retirement journey is different. Some dream of travel and adventure, while others want family time or freedom to enjoy each day.
Key points to remember:
- Start planning early and stay flexible as goals or circumstances change.
- Prepare for risks like inflation, taxes, and market volatility.
- Build a sustainable strategy to support the lifestyle you want.
Retirement should be about enjoying what you’ve built, not worrying about outliving your savings.
Ready To Start Planning Your Retirement Destination?
Connect with the Accel Wealth Management team to create a personalized plan that aligns with your goals and builds confidence for the road ahead.
Disclosure: Fixed Annuities are long term insurance contracts and there is a surrender charge imposed generally during the first 5 to 7 years that you own the annuity contract. Withdrawals prior to age 59-1/2 may result in a 10% IRS tax penalty, in addition to any ordinary income tax. Any guarantees of the annuity are backed by the financial strength of the underlying insurance company.