Retirement income planning

Your Paycheck Ends. Your Need for Reliable Cash Flow Does Not.

Retirement-income planning connects Social Security, pensions, cash reserves, taxable investments, retirement accounts and portfolio risk into a repeatable spending system.

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Retirement education with visible sources.Primary public sources checked October 7, 2026.How we review content →

Quick answer: A retirement-income plan answers one question in a repeatable way: where does next month's spending money come from? Start by separating essential from discretionary spending. Cover as much essential spending as practical with reliable income such as Social Security and any pension. Then decide which accounts fill the remaining gap, in what order, and how you will adjust when markets, taxes or health change.

Step 1: Separate essential from discretionary spending

Essential spending is what you must pay in any market: housing, food, utilities, insurance, healthcare, transportation and minimum debt payments. Discretionary spending, such as travel, gifts, hobbies and dining out, is important but can flex. The split matters because it tells you how much income needs to be dependable, and how much room you have to adjust after a bad market year.

Step 2: Map your income floor

List the income that arrives regardless of markets: Social Security, pensions and any annuity payments. Compare it with essential spending. The difference shows how much of your essential spending depends on the portfolio.

Hypothetical income map for a married couple, both 67 (illustration only)
Item	Annual amount
Essential spending	$54,000
Discretionary spending	$18,000
Total spending goal	$72,000
Social Security (both spouses)	$42,000
Pension	$9,000
Reliable income	$51,000
Essential spending covered by reliable income	94%
Gap the portfolio must fund (before taxes)	$21,000

Hypothetical In this illustration, the portfolio funds $21,000 a year plus any taxes on withdrawals. On a $600,000 portfolio, that is a 3.5% initial withdrawal rate before taxes. The numbers are invented to show the method. A sustainable withdrawal rate for any household depends on its time horizon, investments, flexibility and other resources. No rate is safe in every market.

Step 3: Decide which accounts fill the gap

Each type of account is taxed differently when you withdraw from it. The order you draw on them affects taxes now and later, Marketplace costs before 65 and Medicare premiums after 65.

How withdrawals are generally taxed by account type
Account	Withdrawals generally	Planning notes
Cash and savings	Not taxed (principal); interest is taxed as earned	Useful for reserves and for keeping income low in specific years
Taxable brokerage	Only realized gains and income are taxed; long-term gains may qualify for 0%, 15% or 20% rates	The 2026 0% long-term gain rate applies up to $49,450 (single) or $98,900 (joint) of taxable income
Traditional 401(k)/IRA	Taxed as ordinary income	RMDs begin at 73 (born 1951–1959) or 75 (born 1960 or later)
Roth IRA / Roth 401(k)	Qualified distributions are tax-free	Roth IRAs have no lifetime RMDs. Five-year and age-59½ rules apply.
HSA	Tax-free for qualified medical expenses	Can be a dedicated source for healthcare costs, including some Medicare premiums

A common default is to spend from taxable accounts first, then traditional, then Roth. But a blended approach, such as drawing some traditional money each year to use lower brackets, can sometimes reduce taxes over a lifetime. Which approach fits depends on your projection. The retirement tax window explains the trade-offs.

Step 4: Build in the three big retirement-income risks

Sequence risk: poor returns early in retirement can do outsized damage. A cash reserve and a spending-adjustment rule help. See sequence-of-returns risk.
Inflation: retirement can last 30 years or more. Social Security adjusts each year (2.8% for 2026), but most pensions and fixed payments do not. A portion of the portfolio usually needs long-term growth potential.
Longevity: plan past average life expectancy, and plan for a survivor. When one spouse dies, the household keeps only the larger Social Security benefit and may face higher single-filer tax brackets.

Step 5: Set up the paycheck, then review it every year

Choose one account that receives income and pays your monthly bills, like a paycheck.
Decide how often it is refilled (monthly, quarterly or annually) and from which accounts.
Set tax withholding on withdrawals and Social Security, or make estimated payments.
Review every year: spending, investment results, tax law changes, required distributions, Medicare premiums and health.
Write down what you will change after a bad market year before it happens.

Plan ahead for required minimum distributions

Required minimum distributions (RMDs) from traditional IRAs and most employer plans begin at 73 for people born from 1951 through 1959, and at 75 for those born in 1960 or later. Once they begin, RMDs set a minimum amount of taxable income each year, whether or not you need the money. Building RMDs into the income plan early, for example by drawing on traditional accounts in lower-income years before RMDs begin, can make later years more predictable. The trade-offs are covered in Roth conversions in the retirement window.

Frequently asked questions

How much can I withdraw from my retirement savings each year?

There is no single answer. A sustainable rate depends on how long the money must last, how it is invested, how flexible your spending is, your other income and taxes. Research rules of thumb exist, but none is safe in every market, so review withdrawals each year.

Which account should I withdraw from first?

It depends on your tax picture. Many people start with taxable accounts and leave Roth money for last. Blending traditional withdrawals into lower-income years can sometimes lower lifetime taxes. A multi-year projection helps compare the options.

Do I need a cash reserve in retirement?

Many retirement-income plans hold a reserve for near-term spending and emergencies, so withdrawals do not have to come from investments during a downturn. The right size depends on your reliable income, spending flexibility and comfort with risk.

What happens to retirement income when a spouse dies?

The surviving spouse generally keeps the larger of the two Social Security benefits, and the smaller one stops. Pension income may continue or stop, depending on the payment option chosen. Tax brackets usually become single-filer brackets after the year of death.

What to do next

Use the 55–65 Retirement Opportunity Guide to work through the income-floor and retirement-paycheck decisions.
If you are under 65, add healthcare costs with the Retiring Before Medicare Checklist.
Schedule a conversation to build or review your retirement paycheck plan.

Sources

All figures labeled hypothetical are illustrations only. Investing involves risk, including possible loss of principal. This page is general education, not individualized advice.

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Content review

Prepared by Strong Tower Advisors for general retirement education. Rule-based content is linked to primary public sources where practical and is reviewed periodically because tax, retirement-plan, Social Security, healthcare and Medicare rules can change.

About Strong Tower Advisors · Editorial and sourcing standards · Last reviewed October 2026