After decades of building your retirement nest egg, the transition from saving to spending can feel overwhelming. The biggest concern? Make sure your money lasts as long as you do. A solid retirement drawdown strategy helps you strike the right balance—ensuring financial security while enjoying the retirement you’ve worked so hard for.
In a recent conversation, Erin and Larry discussed six key variables that can make or break your retirement income strategy. Let’s break them down.
1. Minimize Taxes to Keep More of Your Money
One of the most significant retirement expenses—often overlooked—is taxes. Different types of retirement income (401(k)s, IRAs, Social Security, pensions, investments) are taxed differently. Without a plan, you could end up paying more than necessary.
We’re in a historically low tax environment, but tax rates are set to increase in 2026 if current laws don’t change. That means strategic tax planning today could save you thousands throughout your retirement. Some key strategies may include:
- Converting traditional IRAs to Roth IRAs to minimize future tax burdens.
- Withdrawing from taxable and tax-deferred accounts strategically to avoid unnecessary taxes.
- Timing your required minimum distributions (RMDs) wisely to prevent big tax jumps.
2. Optimize Your Social Security Benefits
Social Security is one of the most misunderstood pieces of retirement planning. Many retirees focus solely on when they’ll “break-even” on benefits, but that’s only part of the story.
Larry emphasized that Social Security claiming strategies should be coordinated with your other assets and income sources. Factors to consider:
- The impact of cost-of-living adjustments (COLA) over time.
- How spousal benefits change if one spouse passes away.
- Whether delaying benefits past full retirement age will provide long-term advantages.
This decision is too important to make alone—consulting a financial advisor can help maximize your lifetime benefits.
3. Choose the Right Pension Payout
For those lucky enough to have a pension, the decision on how to take payments is crucial. Options often include:
- Single-life annuity (higher monthly payout but stops when you pass).
- Joint-and-survivor annuity (lower payments but continues for a surviving spouse).
Since pension income is fully taxable, taking the wrong payout option could push you into a higher tax bracket. Additionally, if protecting a spouse is a concern, insurance strategies can supplement or replace lost pension income.
4. Balance Guaranteed Income with Long-Term Growth
A key retirement challenge is balancing safety and growth. If you play it too safe, inflation could erode your purchasing power, and if you take on too much risk, market downturns could hurt your income stream.
A well-designed portfolio includes:
- Guaranteed income sources (Social Security, pensions, annuities).
- Growth investments to outpace inflation (stocks, mutual funds).
- Low-volatility assets for stability (bonds, alternative investments).
A longevity annuity can ensure you never outlive your money while allowing room for growth.
5. Plan for Longevity—Your Money Needs to Last
We’re living longer than ever. That’s excellent news—but it means your money has to last 25-30+ years in retirement. Running out of money at age 80 or 85 is a real risk if you don’t plan properly.
Key steps to longevity-proof your finances:
- Avoid withdrawing too much too soon—use a sustainable withdrawal rate.
- Plan for healthcare costs, which often increase with age.
- Ensure your plan accounts for a surviving spouse’s income needs.
As Larry put it: You don’t want to be the wealthiest person in the graveyard. Make sure you’re spending efficiently while still leaving a meaningful legacy.
6. Account for Inflation—$6,000 Today Won’t Be $6,000 Tomorrow
Inflation is one of the biggest threats to retirees. If your plan doesn’t factor in rising costs, you might be fine in your 60s but struggling in your 80s.
Example:
To maintain the same lifestyle, $6,000/month today must be $7,200/month in 10 years (assuming 2% annual inflation).
And if recent years have taught us anything, it’s that inflation can surprise us—think of how grocery and gas prices have jumped.
A retirement plan should include inflation-adjusted income streams to ensure purchasing power isn’t lost over time.
Final Thoughts: A Retirement Plan Built to Last
There’s no one-size-fits-all approach to withdrawing money in retirement. Every decision—taxes, Social Security, pensions, investments, risk, and inflation—must be carefully coordinated for a sustainable financial future.
At SFA Wealth, we specialize in personalized retirement strategies that help you enjoy retirement without worrying about running out of money.
Have questions? Call 615-216-1048 or visit sfawealth.com to schedule a consultation.
With the right strategy, you can confidently stop saving and start spending—wisely.