You Built the Portfolio. Now Build the Paycheck.
Retirement changes the math. The question is no longer simply “How much have I accumulated?”
It becomes: “How much can I reliably spend—and how long does the income need to last?”
A retirement income strategy coordinates Social Security, pensions, retirement accounts, investments and insurance-based income solutions around the lifestyle those assets are intended to support.
Accumulation and Distribution Are Two Different Jobs.
For most of your working life, the objective was relatively simple: save, invest, diversify and accumulate.
Retirement introduces a different problem. The portfolio that once received contributions may now need to provide withdrawals for housing, food, healthcare, travel and the lifestyle you spent years building.
That means a retirement plan should address more than the value of your accounts. It should address how those accounts are expected to produce income.
Your Retirement Money May Have Three Different Jobs.
Income
Assets intended to pay recurring living expenses may require a different strategy than assets intended primarily for long-term growth.
Growth
Some retirement assets may remain invested for future purchasing power, inflation protection and expenses that may occur many years later.
Liquidity
Accessible reserves can help cover emergencies, opportunities and unexpected expenses without disrupting longer-term income assets.
Your Paycheck Stops. Your Expenses Don’t.
Retirement income planning is ultimately about replacing the paycheck that used to arrive while you were working.
Social Security, pensions, investment withdrawals and annuity income can each perform different jobs.
The objective does not have to be guaranteeing every dollar of retirement spending. Instead, consider which expenses you want supported by predictable income and which assets you are comfortable leaving exposed to market opportunity.
Essential Expenses
Housing, utilities, food, insurance, healthcare and other recurring obligations.
Lifestyle Expenses
Travel, entertainment, hobbies, dining, gifts and other discretionary spending.
Future & Legacy
Long-term care considerations, unexpected expenses and assets intended for family or other legacy objectives.
Start by Identifying Your Retirement Income Gap.
Before deciding whether additional income is needed, start with the income you already expect to receive.
Existing predictable income may include Social Security, pensions and other contractual income sources.
The gap is where the planning becomes important.
If your desired spending exceeds your existing predictable income, the next question is how your accumulated assets should help produce the additional income you need.
How Much of Your Monthly Lifestyle Should Depend on the Market?
Market investments can remain an important part of retirement. Growth, flexibility and liquidity may all matter.
But there is an important distinction between money invested for future growth and money that must be sold or withdrawn every month to pay recurring bills.
Predictable Income
Social Security, pensions and certain insurance-based income solutions can provide payments that are not dependent on selling investments each month.
Market-Based Withdrawals
Investment portfolios can provide growth potential and flexibility, but account values and the sustainability of withdrawals can be affected by market performance.
Retirement Introduces Sequence-of-Returns Risk.
During accumulation, a market decline can be uncomfortable. During retirement, a decline can become more consequential when withdrawals are occurring at the same time.
Selling investments after a significant decline can reduce the amount of capital remaining to participate in a future recovery.
That is why two retirees with similar average investment returns can experience different outcomes depending on when positive and negative returns occur relative to their withdrawals.
Creating predictable income for a portion of recurring expenses is one strategy that may reduce dependence on selling market assets at an unfavorable time.
Where Can Annuities Fit?
Annuities are insurance contracts. Different types of annuities are designed to solve different problems, including accumulation, principal protection and retirement income.
When the objective is lifetime income, several structures may be considered depending on the client's circumstances.
Immediate Income
A single-premium immediate annuity can convert a lump sum into periodic income beginning relatively soon after the contract is established.
Deferred Income
Certain annuity structures can establish income scheduled to begin later, allowing assets to be positioned today for a future income objective.
Income Riders
Some deferred annuities offer optional benefits designed to provide contractual lifetime withdrawals, subject to the specific rider's terms, costs and limitations.
Sometimes the Goal Is Simple: Turn a Portion of Savings Into a Paycheck.
Certain annuity structures can convert retirement assets into periodic income for a specified period or, depending on the option selected, for life.
Income may be structured for one person or, where available and selected, for two lives.
But income guarantees involve tradeoffs. Liquidity, death-benefit provisions, surrender terms and access to principal can vary substantially by contract.
The largest monthly payment is not automatically the best retirement-income decision.
Start With the Lifetime Income You Already Have.
Before considering an additional income solution, identify the income already built into your retirement.
Social Security & Pensions
These income sources may establish the foundation of the retirement paycheck. The next question is how much of your anticipated spending they are expected to cover.
Retirement Accounts & Savings
IRAs, 401(k)s, 403(b)s, TSP accounts, taxable investments and other savings may provide the additional income, liquidity and growth needed to complete the plan.
Can IRA, 401(k), 403(b) or TSP Money Be Used for Retirement Income?
Qualified retirement assets are commonly an important source of retirement income. Depending on the circumstances and applicable plan and tax rules, retirement assets may remain invested, be distributed over time, be rolled to another eligible retirement arrangement, or be used to fund an annuity.
An annuity does not add another layer of tax deferral to money that is already tax-deferred inside a qualified retirement account.
If qualified assets are used to purchase an annuity, the reason should relate to the insurance contract's income or other contractual features—not an additional tax-deferral benefit.
Distribution decisions can have tax consequences and should be coordinated with qualified tax and legal professionals when appropriate.
Income and Liquidity Need to Be Balanced.
A retirement income strategy should not simply attempt to maximize guaranteed income without considering access to money.
Retirees may still need readily available assets for emergencies, healthcare, major purchases, family needs and opportunities.
That is why retirement assets can be divided by purpose rather than forcing every dollar into the same strategy.
Income Bucket
Assets positioned primarily to support recurring retirement spending.
Liquidity Bucket
Assets kept accessible for near-term needs and unexpected expenses.
Growth & Legacy Bucket
Assets positioned for longer-term objectives, future purchasing power or legacy goals.
Questions Worth Answering Before You Retire
Start With the Income Plan—not the Product.
A fixed annuity, MYGA, fixed indexed annuity, immediate annuity, variable annuity or investment portfolio should not be selected simply because one feature looks attractive.
First determine what job the money needs to perform.
Then evaluate potential solutions based on income needs, liquidity, market risk, guarantees, time horizon, tax considerations and legacy objectives.
The product should serve the retirement plan—not the other way around.
You Built the Portfolio. Now Build the Paycheck.
TUSK can help you review your retirement assets, existing income sources and anticipated expenses to identify your retirement income gap and evaluate where predictable lifetime income may—or may not— fit into your overall strategy.
The objective is not simply more income. It is creating an income structure designed around the retirement you actually want to live.
This material is provided for general educational purposes only and is not intended as individualized investment, tax or legal advice. Annuities are insurance contracts. Guarantees, including lifetime income guarantees, are subject to the claims-paying ability of the issuing insurance company and the terms of the applicable contract. Product availability, features, fees, surrender provisions, withdrawal limitations, income benefits, liquidity provisions and tax treatment vary by contract and individual circumstances. Withdrawals and distributions may have tax consequences. TUSK does not provide tax or legal advice. Clients should consult their qualified tax and legal professionals regarding their individual circumstances.