Retirement income: Six steps to creating your own paycheck

Woman creating a plan to make sure her retirement savings last

When it’s time to retire, replacing your work paycheck with a retirement income requires a solid strategy. Creating a plan can help ensure your money will last through your whole retirement.

Getting started

Everyone’s needs in retirement are different. That’s why a personalized strategy for turning your savings into retirement income is essential.

It starts with:

  • Determining how much money you may need in retirement to cover your expenses
  • Identifying income sources and retirement assets available to help fund your retirement
  • Understanding how retirement savings can generate cash flow to help cover expenses
  • Determining if your withdrawal rate from savings is likely sustainable throughout retirement

Six steps to build your retirement income plan

To begin building your plan, walk through these 6 simple steps with your financial professional.

Step 1: Define your goals.

The first thing your financial professional will do is help you evaluate your retirement goals: What do you envision doing during your retirement?

Step 2: Establish the basics.

You’ll need to provide your financial professional with some basic information. This may include your date of birth, your expected retirement year, your current retirement savings, and any other benefits you expect to receive in retirement (such as Social Security or a pension plan).

Step 3: Analyze your situation.

Your financial professional will review your overall asset allocation and your expected income during retirement. Then they’ll provide an estimate of how long your savings may last.

Step 4: Evaluate your options.

If your analysis reveals that you aren't quite able to achieve your retirement goals, your financial professional can help you assess possible next steps. These might include pulling back on expenses, boosting your savings level, adjusting your investment allocations, or working a little longer.

Step 5: Make adjustments.

If needed, your financial professional can help you make any financial adjustments. Examples include increasing your retirement plan contributions, rolling over assets from a previous employer's retirement plan, or opening a new individual retirement account (IRA).

Step 6: Choose income solutions.

After evaluating your current situation and retirement goals, your financial professional will suggest retirement income solutions that make sense for you.

Your plan could include:

  • Keeping savings in your retirement plan, an IRA rollover, or a lump sum distribution
  • Investing options like income annuities, fixed deferred annuities, mutual funds, and bank products (CDs and savings accounts)
  • A combination of both

For example, an income annuity provides assurance, predictability, and a guaranteed income stream for life.* Mutual funds, on the other hand, offer control over how savings are invested and the flexibility to access funds if needed. Investing involves risk, including the possible loss of principal. By splitting retirement savings between the two, you can enjoy the features of each.

Pay attention to the details

When evaluating your choices, consider the differences in fees and expenses, as well as tax and legal implications (creditor protections and required minimum distributions), for each investment option as well as your tolerance for risk and the amount of time before you retire. Your advisor or tax professional can help.

By taking a methodical approach to creating your retirement income paycheck, you can reduce your chances of outliving your savings—leaving yourself more freedom to enjoy the retirement you want.

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* All annuity product guarantees are subject to the claims-paying ability of the issuing insurer.