How to Turn Your Retirement Savings Into Income

We spend most of our adult lives saving for retirement. We want to ensure that our twilight years are as comfortable as possible and that we have the kind of income to enjoy it truly. Finding ways to transform the retirement savings you have carefully built up over time and turn them into guaranteed retirement income is a question that many retirees ask themselves. While each situation is unique, there are multiple strategies that you can use to make your retirement as enjoyable as possible. 

Method #1- The 4% “Safe” Withdrawal Rate

Developed by financial advisor Willam Bengen in the 1990s, the 4% “Safe” Withdrawal rate is a traditional approach to your retirement savings and income. The initial withdrawal from your retirement plan is 4% of the total amount in your savings. Each subsequent year would see an incremental increase in the amount withdrawn while taking inflation into account. This approach provides you with an approach developed based on real-world scenarios backed through further study. However, changes in the market and the yields you see from long-term bonds can make this approach more volatile than initially projected. 

Method #2- Annuity 

Purchased through an insurance company, annuities can provide retirees with the largest income stream without being subject to market volatility. The insurance company offers you a lump sum for your retirement savings and then pays you annual payments for as long as you live, with the remaining sum doled out to your living relatives. 

Method #3- Spend Only What You Make Through Investments

This method requires you to have a good eye for investments over the long term by taking the time to invest in the right stocks and bonds that will yield substantial returns. This method will see the most volatility due to the nature of the stock market. However, by relying solely on your investment portfolio’s yield, you can protect your nest egg and save it to pass on to your beneficiaries when the time comes. 

Method #4- Spend Safely In Retirement Plan

The method developed by the Stanford Center for Longevity and the Society of Actuaries studied a staggering 292 retirement strategies to determine their “ideal” spending plan. A combination of withdrawing 3.5% of your savings during the age of 65-70, delaying social security benefits to age 70, and then utilizing the IRS determined spending tables to dole out the rest of your savings over time will help prevent you from running out money throughout retirement. You maintain control over your nest egg and don’t have to worry about annuity payments from an insurance company.  

Which Way Is Right For Me?

Every retirement is different. Changing circumstances, different economic conditions, and various other factors need to be taken into account before you can determine which method of generating income throughout your retirement makes sense for you. Having help with income planning for retirement will ensure that you make the right choices for a happy retirement. The team at Preservation Wealth Management has the expertise to help you consider your options and make your retirement income work for you. Contact our team for a consultation today!

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