Retirement is often seen as the reward for years of hard work, but for many, the idea of transitioning from a paycheck to relying on savings and investments can feel like navigating a maze. When you’re no longer working full-time, how do you ensure your money lasts through the years? The question isn’t just about how much you’ve saved, but how you can structure your income to ensure it’s enough to cover your needs while providing financial security and peace of mind.

In my nearly two decades of experience in financial planning, I’ve seen countless clients struggle with the uncertainty of how to effectively manage their retirement income. Many are unsure of the best way to draw from their savings, balance risk, or manage taxes. After working through these concerns with many families, I’ve identified five strategies that can make a significant difference in ensuring your retirement income lasts. Let’s walk through these strategies to help you take control of your financial future.

1. Create a Sustainable Withdrawal Strategy

One of the first questions I get from retirees is how much they can afford to withdraw from their retirement accounts without running out of money. While there’s no one-size-fits-all answer, creating a sustainable withdrawal strategy is key to ensuring your income can last as long as you need it to. A general rule of thumb has been the “4% rule,” which suggests you can withdraw 4% of your total savings each year in retirement. This may seem straightforward, but it’s important to remember that this rule is based on historical market performance and may not always hold true in the future.

The key here is to have a strategy that accounts for your specific needs and circumstances. Factors like your desired lifestyle, life expectancy, and whether you have other sources of income—such as Social Security or a pension—can affect how much you can afford to withdraw each year. One approach I recommend is a flexible withdrawal strategy, where you adjust withdrawals based on market conditions and your spending needs. This flexibility ensures you don’t deplete your savings too quickly during years of poor market performance, while still allowing for a steady stream of income when markets are strong.

2. Diversify Your Income Sources

While many people focus on accumulating funds in retirement accounts, such as 401(k)s or IRAs, it’s equally important to diversify your income sources. If you rely entirely on your retirement savings to fund your lifestyle, you might find yourself in a difficult position if the market takes a downturn. On top of that, the tax implications of drawing from a single account can become complicated and potentially reduce your income.

A diversified income strategy involves using a mix of different income streams to reduce the risk of relying too heavily on any one source. This might include a combination of Social Security benefits, pensions, rental income, part-time work, and, of course, your retirement savings. For example, Social Security can serve as a steady foundation of income, which can allow you to be more flexible with your investment withdrawals. In contrast, other sources, like annuities or rental income, can provide additional layers of security.

One of the most effective ways to diversify your income streams is through investments that generate passive income. Dividends from stocks, interest from bonds, and income from real estate can provide a steady flow of cash to supplement withdrawals from your retirement accounts. The more diverse your income sources, the more resilient your retirement plan will be in the face of unexpected financial challenges.

3. Manage Taxes Carefully

When planning for retirement, it’s easy to focus on how much you’re saving, but it’s just as important to consider how much you’ll owe in taxes once you start withdrawing from your accounts. In fact, taxes can have a significant impact on your retirement income, potentially reducing your purchasing power and limiting your ability to enjoy the retirement you’ve planned for.

Understanding the tax implications of your withdrawals is critical. For example, withdrawals from traditional retirement accounts like 401(k)s and IRAs are taxed as ordinary income. If you withdraw too much from these accounts too early, you could end up in a higher tax bracket, which would reduce the amount of income you have available to spend. By carefully planning your withdrawals and considering the tax impact, you can minimize the amount you owe and keep more of your retirement savings.

One strategy I often recommend is to utilize Roth IRAs, which allow your investments to grow tax-free. Roth IRAs don’t require minimum distributions during your lifetime, which gives you more flexibility in managing when and how you take your withdrawals. Converting some of your traditional IRA or 401(k) funds to a Roth IRA before retirement, even if it involves paying taxes now, can help you avoid higher taxes later and offer tax-free growth on your investments.

4. Plan for Healthcare Costs

Healthcare costs are one of the biggest concerns for retirees. Medical expenses often rise as we age, and many people underestimate how much they’ll need to spend on healthcare in retirement. Medicare is a great help, but it doesn’t cover everything, and out-of-pocket expenses can add up quickly. These costs can put a strain on your retirement income if you’re not prepared.

Planning for healthcare costs involves considering things like long-term care, prescription medications, and any supplemental insurance you may need. For example, a Medicare Advantage plan might be an option for retirees who want more coverage than standard Medicare offers. It’s also worth considering a Health Savings Account (HSA) if you’re still working, as this tax-advantaged account can help cover medical expenses in retirement.

Another important consideration is long-term care insurance. While it’s not something everyone needs, it can help protect your retirement assets from being depleted by the high costs of assisted living or nursing home care. By planning ahead for healthcare expenses, you can ensure that these costs don’t derail your retirement strategy.

5. Adjust Your Lifestyle for the Long Term

One of the most valuable strategies for ensuring your retirement income lasts is adjusting your lifestyle to fit your long-term financial situation. While this may seem difficult, many retirees find that they can live comfortably on less than they expected if they’re willing to make adjustments. This could mean downsizing your home, limiting travel expenses, or finding ways to cut costs on everyday items. The goal is to align your spending with your income, ensuring that you can maintain a reasonable lifestyle without jeopardizing your financial security.

For some, this may also mean finding ways to stay engaged in work, whether through part-time employment, consulting, or even volunteer work. Not only can this provide extra income, but it can also give you a sense of purpose and fulfillment in retirement.

Building Your Retirement Income Strategy

Retirement is a time for enjoying the fruits of your labor, but it requires thoughtful planning to ensure that you have the income to support your lifestyle. By creating a sustainable withdrawal strategy, diversifying your income sources, managing taxes, planning for healthcare, and adjusting your lifestyle for the long term, you can build a solid foundation for your retirement.

As a financial advisor, my job is to help guide individuals through the maze of retirement planning, ensuring that they can live comfortably and confidently during their retirement years. If you’re nearing retirement or already retired and want to discuss how to structure your income, feel free to reach out. Together, we can create a plan that allows you to navigate this transition smoothly, with financial security and peace of mind.