Retirement Income Strategies: How to Make Your Money Last

Accumulating a retirement nest egg is half the challenge. The other half — turning assets into sustainable income that lasts 30+ years — requires deliberate strategy. Most people plan the accumulation and wing the distribution.

The income sources in retirement

• Social Security (70% replacement at FRA for median earner, more with delay)
• Portfolio withdrawals (traditional IRA, 401k, Roth IRA)
• Pension (if you have one)
• Part-time work (increasingly common, especially in FIRE community)
• Rental income
• Annuity payments (for those who purchased)

The bucket strategy for retirement income

1. Bucket 1 (0–2 years): 2 years of expenses in cash or money market. Never sell investments for immediate needs — withdraw from here.
2. Bucket 2 (2–10 years): Conservative investments — short/medium term bonds, dividend stocks. Replenishes Bucket 1 annually.
3. Bucket 3 (10+ years): Growth investments — equity index funds. Long time horizon allows riding out market downturns.

Withdrawal sequencing: which accounts to draw first?

General order: Taxable accounts first (most tax-efficient drawdown), then traditional IRA/401k (ordinary income, get out before RMDs force large distributions), Roth last (tax-free growth continues, no RMDs). Exception: optimize for bracket management — consider traditional IRA withdrawals in years when income is low to stay in lower tax bracket.

The annuity role: when it makes sense

A simple income annuity (SPIA) converts a lump sum to guaranteed lifetime income. Useful: if you're worried about outliving assets (longevity risk), if your Social Security + pension don't cover basic expenses, or if you have no heirs and value certainty over bequest. Annuitizing 20–30% of assets to cover fixed expenses while keeping 70–80% invested is the balanced approach most advisors recommend.