Turning Retirement Savings to Retirement Income

Reaching your retirement goal is often a numbers game. Did you establish a dollar amount your retirement savings needed to reach? Are you now the age where it’s time to shut things down? In any case, the transition from working to retirement is not only a milestone in your life, it’s also one of the most critical moments for your finances. No amount of planning can fully prepare for the unknown. How long you live, how healthy you are, inflation and changing tax laws could mean the nest egg dwindling faster than expected. And whether you’re fortunate to be worrying about what you’re leaving to the next generation or you need all you have just to live on, it makes sense to turn retirement savings to retirement income. And, yes, it is very much a numbers game.

Assess your retirement savings

It’s initially about the budget; what you need to live comfortably. Then look at your sources of retirement income and separate them as guaranteed and variable. Social security and pensions fall into the guaranteed category and retirement accounts, such as IRAs and 401(k)s are variable. 


Guaranteed sources may or may not include a cost-of-living component, but essentially, you receive a fixed amount that does not grow. However, deferring when you begin to receive your benefits, where possible, can make a big difference. The chart below compares social security benefits as a percentage based on full retirement age (e.g. 66 for those born from 1943 – 1954.)

Birth Year Age 62 Age 63 Age 64 Age 65 Age 66 Age 67 Age 68 Age 69 Age 70
1943-1954 75% 80% 86.7% 93.3% 100% 108% 116% 124% 132%
1955 74.2% 79.2% 85.6% 92.2% 98.9% 106.7% 114.7% 122.7% 130.7%
1956 73.3% 78.3% 84.4% 91.1% 97.8% 105.3% 113.3% 121.3% 129.3%
1957 72.5% 77.5% 83.3% 90% 96.7% 104% 112% 120% 128%
1958 71.7% 76.7% 82.2% 88.9% 95.6% 102.7% 110.7% 118.7% 126.7%
1959 70.8% 75.8% 81.1% 87.8% 94.4% 101.3% 109.3% 117.3% 125.3%
1960 or later 70% 75% 80% 86.7% 93.3% 100% 108% 116% 124%

Source: Social Security Administration


It is up to you to decide where to invest and how much to withdraw each year in a disciplined way to provide income to supplement your guaranteed sources for 30 years or longer. Even the best systematic withdrawal plan needs a growth component to ensure sustaining your savings for a lengthy retirement. When you were working, market fluctuations were less problematic because there was time to recoup any current losses. Although that’s not the case in retirement, it’s helpful to consider creating categories of timeframes when you will need your retirement money. For example, a cash reserve fund for money you will need in the next year or two and a long-term fund that invests in capital markets to provide some earnings and growth potential with minimal risk. Also, it’s necessary to factor in the tax consequences when withdrawals are made from each type of investment account and also be mindful of mandatory minimum distributions triggered by age.

Spinnaker Investment Group

Over the years, we have provided personalized investment advice to people of all circumstances designed to help them achieve their goals and live their dreams. For a quick reality check of where your portfolio is, click here.  


The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.

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