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Three Ways to Simplify Retirement Income Planning

7 mins read

Presented by Fred Gaskin

After planning and looking forward to retirement for years, it isn’t unusual that the actual transition to retirement can cause significant stress for many newer retirees. 

Retirement means different things to different people. It can be a time to travel, spend more time with family, or pursue a personal passion. But making a move from a steady stream of income to tapping into decades’ worth of hard-earned savings can be very overwhelming. 

According to Schwab’s 2020 Modern Retirement survey, 52 percent of Americans within five years of retirement feel overwhelmed by how they will manage different income sources once they make the transition into retirement. With 10,000 Baby Boomers turning 65 every day**, people need help turning their savings into steady income and making their money last in retirement.

Schwab’s survey also found that nearly three-quarters of pre-retirees are worried about running out of money in retirement, so if that idea scares you, you’re not alone.

Fortunately, there are some steps you can take to better manage your income needs in retirement: 

1. Have a plan about how much you can spend in retirement. Schwab’s survey found that retirement income planning is more overwhelming than other financial topics often considered stressful including the financial impact of losing a job, buying a home, or paying for college. Mapping out a plan for how much money you’ll need, how to strategically withdraw money along the way, and how to manage your investment portfolio will give you more confidence that you’re on the right path. You wouldn’t go on a long road trip without mapping out your journey – approach your retirement the same way.

2. Think about how to invest. Just because you’ve hit retirement and are starting to draw down from your savings doesn’t mean you should stop investing. A portion of your assets should remain invested in order to help contend with inflation and make your money last in retirement. Half of the pre-retirees surveyed by Schwab admit they find it difficult to know how to invest, so for some people it might help to get investing guidance from a professional.

3. Don’t forget about taxes. According to Schwab’s survey, 70 percent of pre-retirees are unfamiliar with the tax implications of withdrawing money from their retirement accounts. How you manage tax obligations will depend on your specific situation, but it can be important to think about diversifying your account types, including tax-deferred, taxable, and tax-advantaged Roth IRA accounts. And don’t forget about required minimum distributions from retirement accounts.

Schwab Intelligent Income™, an automated income solution available with Schwab Intelligent Portfolios, can help answer critical and often complex income-related questions about how much to withdraw, how to invest based on individual goals, risk tolerance, and time horizon, and how to withdraw from a combination of taxable, tax-deferred, and Roth enrolled accounts in a tax-smart and efficient way. 

So much of the focus is on savings and investing for the future, and rightfully so, but having a plan in place to manage your savings once you hit your golden years is equally important.

For most retirees, retaining flexibility will be an important determinant of whether they enjoy their ‘Golden Years’. As I’ve pointed out in prior columns, the hardest part for most clients in these situations is just getting started. Once you’ve jumped into the process, you’ll realize that by thoughtfully planning for both your income needs and income sources, you’ll have more confidence and importantly, a better understanding of what you need to do to manage your future. 

More information about Schwab Intelligent Income is available at Schwab.com/IntelligentIncome.

We are here to help, whether it’s retirement income planning or comprehensive financial and estate planning, we have the resource and tools to assist. We would welcome the opportunity to help you move forward with confidence. For more information, call Fred Gaskin at 843-473-3620. 

Fred Gaskin is the branch leader at the Charles Schwab Independent Branch in Bluffton. He has over 35 years of experience helping clients achieve their financial goals. Some content provided here has been compiled from previously published articles authored by various parties at Schwab. 

The information here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. This information does not constitute and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, please consult with a qualified tax advisor, CPA, Financial Planner or Investment Manager.

*Online survey of 1,000 Americans aged 55 and older with $100,000 or more in investable assets. Respondents self-defined as within five years of retirement.

**Pew Research survey

Please read the Schwab Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing, and disclosures related to the Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs. 

Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are made available through Charles Schwab & Co. Inc. (“Schwab”), a dually registered investment advisor and broker dealer. Portfolio management services are provided by Charles Schwab Investment Advisory, Inc. (“CSIA”). Schwab and CSIA are subsidiaries of The Charles Schwab Corporation.

Schwab Intelligent Income® is an optional feature for clients to receive recurring automated withdrawals from their accounts. Schwab does not guarantee the amount or duration withdrawals nor does it guarantee meeting Required Minimum Distributions. You may incur IRS penalties for early withdrawal of funds depending on the account type.

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