Mark Henry is the CEO and founder of alloy wealth management.
Most of the discussion around retirement planning focuses on savings goals. Whether trying to reach a specific number or hitting an 80% retirement income goal, planning is all about wealth accumulation.
Life looks different when you’re retired. Your paycheck disappears and you need new, reliable income sources. Your financial goals shift from saving to generating cash flow. To make your savings last longer, you must spend wisely, be strategic with your withdrawals and reduce your tax liability as much as possible.
In Goldman Sachs’ Retirement Survey and Insights Report 2025, 58% of 5,102 adult respondents He was afraid of exhausting his savings. Here’s how to avoid that fate.
Diversify your income sources.
Most people realize that Social Security only covers a portion of pre-retirement income. However, Social Security and a 401(k) may also be inadequate. The best retirement income strategies combine diverse sources to mitigate market risks, protect against inflation, and meet your needs for your entire life. These income sources include:
1. Retirement Accounts
Retirement accounts are the primary retirement savings vehicle for most working Americans. These include traditional and Roth individual retirement accounts (IRAs), employer-sponsored 401(k)s, and defined benefit pension plans.
Consider investing at least 10% to 15% of your income in a retirement account and start saving as early as possible to take advantage of compound interest. For the median 401(k) balance Americans aged 55 to 64 have an income of $95,642; However, it drops slightly for those 65 and older, as many people begin taking withdrawals.
2. Annuities
Fixed annuities are insurance products that can provide guaranteed lifetime income. They are customizable and available in many forms; Some people begin paying income immediately, while others defer payments for years.
Fixed annuities should not be confused with variable annuities, which are tied to underlying investments and therefore do not provide guaranteed minimum payments. Because of the complexity, it is important to work with a trusted financial advisor when considering purchasing any annuity.
3. Health Savings Accounts
Health savings accounts (HSAs) are an excellent way to provide income in retirement because they are triple tax-advantaged. Contributions are deductible, earnings grow tax-free and you can make tax-free withdrawals for medical expenses before and after retirement.
At age 65, you can also make withdrawals for non-medical purposes without any penalty, although you will have to pay income taxes. Most people underestimate how much medical care they will need as they age and how much it will cost. An HSA can be an effective way to cover these expenses.
4. Social Security
You can start claiming Social Security benefits at age 62, but it is more beneficial to wait until age 70. Maximum monthly benefit for claimants, with early deduction penalty $62 is $2,969 in 2026. The maximum benefit for those who wait until age 70 to claim is $5,181.
Note the major RMD changes.
Required minimum distributions (RMDs) are set amounts that must be withdrawn each year from traditional IRAs, 401(k)s and other tax-deferred accounts. In addition to setting contribution limits for these accounts, the IRS also regulates taxation penalties and the age at which you must begin taking RMDs, which before 2023 was 72.
passage of SECURE 2.0 ActHowever, it brought about several significant changes in the RMD. Specifically, the RMD age increases to 73 in 2023 and to 75 in 2033. These extra years of wealth accumulation can make a big difference.
The SECURE 2.0 Act also reduced the penalty for failing to take RMDs on time from 50% to 25% of the amount not withdrawn.
Use RMD tax mitigation strategies.
If you’re lucky enough to have a large nest egg set up for retirement, you may be in a higher tax bracket than anticipated after you retire. Taxes on capital gains, dividends and interest income from investment accounts, as well as income taxes on Social Security benefits and RMDs, can quickly deplete your wealth. Fortunately, several strategies can reduce the tax burden associated with RMDs.
1. Roth Accounts
Roth IRA—and now Roth 401(k)—accounts are exempt from RMDs. Contributions to these accounts are taxed, but withdrawals in retirement are tax-free. Consider converting funds from a traditional IRA to a Roth IRA if you expect to be in a higher tax bracket in retirement.
2. Qualified Charitable Distribution
You can also reduce your taxable income by making qualified charitable distributions (QCDs). You can start doing this at age 70½, more than two years before you have to take RMDs from a traditional IRA. You won’t pay taxes on QCDs, and you may be able to satisfy your RMDs without increasing your tax liability.
3. Withdrawals from tax-deferred accounts
Another option is to start withdrawing from tax-deferred accounts at age 59½. While this may deplete your savings faster, it can also reduce future RMDs and enable you to wait until age 70 to claim Social Security, maximizing your monthly benefit.
Plan for reliable income in retirement.
In a world where Social Security is on rocky ground, pensions are scarce and the future seems uncertain, retirement planning is more complicated than ever. Merely achieving savings targets is not enough; You also need an income and cash flow strategy.
Additionally, consider working with a financial advisor with experience in retirement income planning. Before retirement, they can help you create a strategy that provides reliable income after you leave the workforce. After retirement, they can help you design a withdrawal strategy so you can enjoy your money — without worrying about running out.
The information provided here is not investment, tax or financial advice. You should consult a licensed professional for advice regarding your specific situation.
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