The Basics of Managing Your Retirement Income, Ep #143

I’ve had numerous people ask me about managing their income in retirement. Your income in retirement will be different from everyone else’s, unique to you. But what sources can you draw from? What will it look like? How do you plan for it? Where can you go wrong? I’ll start to dissect each of these topics in this episode of Retirement Made Easy. I’ll lay out some of the important things you need to keep in mind as you manage your retirement income. Check it out!

You will want to hear this episode if you are interested in…

• [1:56] Check out RetirementMadeEasyPodcast.com! 
• [4:25] The main source of retirement income: Social Security 
• [6:34] Other common sources of retirement income
• [8:58] The most important retirement income source
• [12:00] Have a retirement income game plan
• [20:28] Create a tax-efficient retirement income stream

The main source of retirement income: Social Security

The main source of retirement income that most people are familiar with is Social Security. Your social security income is based on your best 35 working years. For those who have claimed their social security and continue to work, as long as what you’re earning is one of your 35 highest working years, social security will recalculate your check every year. 

Most of the population has to have 10 years or 40 quarters of earnings history paying into Social Security. If you don’t meet those requirements—but you’re married—you may be eligible for the spousal benefit. Typically, a married couple will each get a social security check per month

Other sources of retirement income can include a pension, rental property, a small business, a trust, or from part-time work. The most important retirement income comes from your investments: 401ks, 402Bs, IRAs, Roth IRAs, etc. This is where people make unwise decisions. 

The most important retirement income source

Let’s say you’re contributing to a 401k from every paycheck and adding some money to a Roth IRA every month. It’s a consistent way to invest for retirement. You’re not taking an income from them while you’re still working. You hope that the investments grow enough to provide an income while you’re retired. 

The goal is to produce an income that’s a supplement to social security. Drawing from these accounts is what you’ve prepared for your entire career. But when people retire, they’ve gotten so used to saving that they feel uncomfortable withdrawing the money.

Have a retirement income game plan

I recently spoke with someone who retired and withdrew money from his 401k every month, without thought. But in 2022, his million dollars dropped to $600,000. He’s down $400,000. He lost 40% of his money in one year. 

He still needs that income to live on. His fatal mistake was that he never planned out the income he was taking from his 401k. He didn’t adjust how his investments were positioned when his goals changed in retirement. He was selling investments while they were down significantly. Now, his retirement plan must be completely redesigned. 

You have to change your mentality when you retire because it has the potential to derail your entire retirement. You need a game plan. Where is your income going to come from once you retire? 

• How much will each income stream be? 
• How frequently will you receive that income? 
• What are the risks that might derail your income? What could go wrong?

Someone retired and decided to take her $800,000 401k and roll it over into an IRA and purchase a six-month CD paying her 5%. She planned to live on her savings until the CD matured and cash out the interest to live on for the next six months. She’d then buy another CD at 5%. 5% of $800,000 is $40,000 a year. Combined with her social security, she determined it would be all that she’d need to live on.

But she forgot something crucial. Find out what she didn’t take into account in this episode of Retirement Made Easy. 

Resources & People Mentioned

• 3 Steps to Retirement Planning