You deserve to enjoy a retirement lifestyle that fits your goals. Whether you want steady income that lasts your lifetime or want to feel more prepared for the future, building a plan is an important step.
Understanding your income sources, estimating expenses, and managing your assets are key parts of a strong retirement income strategy.
1. Review Your Cash Flow
Start by identifying your income sources so you can plan for retirement needs. Common sources include:
- Social Security
- Pensions
- Annuities
- Withdrawals from IRAs and 401(k)s
- Interest and dividends from investments
- Life insurance (if applicable)
Next, review your outgoing cash flow, which includes expenses and taxes. Expenses can be essential or discretionary, as categorized below.
| Category | Examples |
|---|---|
| Essential | Housing, utilities, groceries |
| Discretionary | Travel, hobbies, entertainment |
| Unexpected | Medical bills, long-term care |
Keep in mind that taxes and inflation can change over time. While tax laws are outside your control, certain strategies may help reduce their impact. Roth IRAs and life insurance can play a role in managing taxes during retirement.
After outlining your income and expenses, create a strategy for steady income. A financial representative can help determine how to withdraw funds in a tax-efficient way while supporting income needs and leaving assets to your heirs.
2. Prepare for the Unexpected
As part of your planning process, it is important to understand risks that may affect your income in retirement. Knowing these risks can help you build strategies to manage them.
Common risks include how long you will live, health care costs, market changes, inflation, and the loss of a spouse.
Making Your Savings Last
Living longer means your retirement savings may need to last longer. Life expectancy plays a key role, especially for married couples planning for joint lifespans.
Longer lifespans can lead to:
- Higher medical expenses
- Long-term care costs
- Greater need for caregiver support
The latest U.S. life expectancy is 79.40 years, increasing by 0.18% since 2024.1 This highlights the importance of factoring longevity into your retirement income planning.
To manage this risk, consider planning for a lifespan that goes beyond your expected age. You may also look at ways to optimize Social Security and consider annuities as a source of lifetime income.
Understanding the Cost of Health Care
Health care costs can rise as you age. Medical expenses have increased for decade.2 About 70% of people age 65 and older will need some type of long-term care.3 Nursing home costs now average $11,294 per month nationwide in 2026, depending on location and level of care.4
Maintaining a healthy lifestyle may help lower the risk of health problems. You may also consider Medicare supplement coverage, long-term care insurance, or life insurance to help cover these costs.
Managing Market Changes
Investments such as stocks and bonds can go up and down over time. Some level of risk may be needed to reach your goals. However, changes in interest rates can affect bonds and CDs, which may lead to lower returns.
Diversification can help reduce the impact of market changes. As you get closer to retirement, you may want to shift more assets into options that focus on income and stability. Regular reviews with your financial representative can help keep your strategy on track.
Considering Inflation
Inflation can reduce the buying power of your savings over time. The consumer price index has increased by an average of 3% per year since 1913.5 This means your expenses may grow even if your income stays the same.
While you cannot control inflation, you can plan for it. Work with your financial professional to identify assets that may respond better to rising costs. Review your expenses each year and adjust as needed.
Social Security includes cost-of-living adjustments, and delaying benefits may increase your monthly payments. Income laddering, which uses different income sources over time, may also help reduce the effects of inflation.
Preparing for the Loss of a Spouse
Losing a spouse can affect both your emotional and financial situation. It may result in a loss of income and an increase in expenses. Life insurance can provide funds after a loss. Annuities with joint or survivor options can help continue income for the surviving spouse. Review different scenarios with your financial representative so you understand how income may change.
3. Plan Your Income Floor
Your income floor is the foundation of your retirement income. It typically includes pensions, annuities, and Social Security. When structured properly, it can provide steady income to help cover essential expenses throughout retirement.
Pensions
Although fewer employers offer pensions today, they remain an important income source for those who have them. Here’s how they generally work:
- Funded by employers, who take on most of the investment risk
- Based on a formula that considers salary and years of service
- Often paid as lifetime income
- May continue to a spouse after death
At retirement, employers typically convert pension benefits into an annuity that provides regular payments.
Annuities
Annuities allow your savings to grow without being taxed until you withdraw the funds. This feature can make them a helpful part of your retirement strategy. They can provide income payments for you and your spouse during retirement.
When you contribute to an annuity, it can provide payments at a future date. These payments can be monthly, quarterly, annually, or as a lump sum. You can choose what works for your needs.
Types of Annuities
There are basically two types of annuities: deferred and immediate.
| Type | How It Works |
|---|---|
| Deferred annuity | Funds grow over time. Payments begin later, typically in retirement. |
| Immediate annuity | Payments begin shortly after the initial investment. |
Additional Types
Fixed deferred annuities are issued by insurance companies and provide set interest rates. In retirement, they can be converted into income payments. Fixed indexed annuities offer tax-deferred growth and may provide higher returns based on market index performance.
You do not pay taxes on earnings while your money remains in the annuity. Once you receive payments, earnings are taxed as ordinary income.
How Annuities Fit Into Your Plan
The guarantees annuities deliver may serve as a buffer against potential losses in the other assets in your portfolio and be valuable components of your retirement income plan. They also may provide you access to emergency funds based on their present value.
4. Maximize Your Social Security Benefits
You have been contributing to Social Security since your first day of work. These benefits are designed to replace part of your income in retirement. When you claim them depends on several factors, including your age and personal situation.
While Social Security may not cover all expenses, planning ahead can help you get more from your benefits. This starts with choosing the right time to file.
When You Can Claim Benefits
| Age | What It Means |
|---|---|
| 62 | Earliest eligibility, with a permanent reduction in benefits |
| Full retirement age | Receive your full benefit amount |
| 70 | Maximum monthly benefit due to delayed credits |
Claiming at age 62 reduces your monthly benefit for life. Waiting longer can increase your monthly payments, up to age 70.
Considerations for Married Couples
Married couples may have additional options based on each spouse’s work history:
- Personal retirement benefits
- Spousal benefits
- Survivor benefits
Coordinating when each spouse claims can affect total household income over time.
Social Security benefits are paid for life and adjusted for inflation. Understanding your claiming options can help you make informed decisions. A financial representative can help answer questions and review your options.
Final Thoughts
Retirement planning involves balancing income, expenses, and risks over time. By reviewing your cash flow, preparing for uncertainties, and building steady income sources, you can create a strategy that supports your goals. Regular reviews and adjustments can help keep your plan aligned with your needs as they change.
Sources
- U.S. Life Expectancy 1950-2025. https://www.macrotrends.net/global-metrics/countries/USA/united-states/life-expectancy.
- How has U.S. spending on healthcare changed over time? https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/.
- Long-term care statistics 2026. https://www.singlecare.com/blog/news/long-term-care-statistics/.
- Nursing Home Costs in 2026. https://www.seniorliving.org/nursing-homes/costs/.
- Consumer Price Index. https://www.bls.gov/cpi/home.htm.
