Develop a retirement
income strategy

 
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If you retire at 65, retirement could easily last three decades. These guidelines can help you develop an income stream that can potentially last your lifetime.

Review your income sources

  • Are you eligible for a pension or other guaranteed benefits?
    If not, consider allocating some assets to purchase annuities that can provide the opportunity for monthly guaranteed income for life.Footnote 1 Rule of thumb: match your lifetime income to essential expenses.
  • Can you continue to earn income by working part-time?
    Working can help you delay drawing income from Social Security and your savings.
  • Can you live on sources besides Social Security for your early retirement years?
    For every month you delay collecting after age 62, your benefit grows.
  • Do you have property that can generate income?
    For example, you may want to rent out a vacation home when you're not using it.
 
A common mistake
during retirement is
investing too
conservatively

Create a drawdown strategy

A drawdown strategy based on your life expectancy is designed to help you avoid outliving your savings. It can help determine the kind of life you lead in retirement, and you'll probably need to revisit it regularly.
If you can live on interest and dividends, your principal can remain intact; for most retirees, though, a combination of interest and principal is the most common drawdown strategy.
When you're creating a drawdown strategy, consider your asset allocation.Footnote 2 A common mistake during retirement is investing too conservatively; since Americans are living longer, it may make sense to consider maintaining some exposure to stocks so that your assets may continue to grow.
Read:
10 tips to help you boost your retirement savings— whatever your age

Consider annuities for predictable income

Annuities are long-term investments designed specifically for retirement purposes. Depending on the type of annuity you choose, you can receive a predictable stream of retirement income based on the claims paying ability of the issuing insurance company. Some advantages of annuities include:

  • Tax-deferred accumulation of earnings
  • Alternative retirement savings vehicle once IRA and 401(k) contribution limits are reached
  • May generate guaranteed lifetime income stream
  • May help reduce your retirement portfolio's volatility
Read:
Annuity options: Choices abound for today's retirees
 
Traditional IRAs require
a certain amount be
withdrawn each year
past age 73Footnote 3

Determine your Required Minimum Distribution (RMD)

RMDs are amounts that the federal government requires you to withdraw annually from your retirement plans after you reach age 73Footnote 3. Traditional IRAs require a certain amount be withdrawn each year past age 73Footnote 3, regardless of whether you are retired or not. Don't draw more than is required unless you have to: Keep your tax-deferred funds working for you as long as possible.

Take action:
Calculate your RMD
6 retirement account distribution tips
Create a retirement budget
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Footnote 1 All annuity contract or rider guarantees, including any fixed crediting rates or annuity payout rates, are backed by the claims paying ability of the issuing insurance company. They are not backed by Merrill or its affiliates, nor do Merrill or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company.

Footnote 
Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets.
Footnote 3 Effective 1/1/2023, the required beginning date is April 1 of the year after you turn age 73. You are required to take an RMD by December 31 each year after that. If you delay your first RMD until April 1 in the year after you turn 73, you will be required to take two RMDs in that year. You may be subject to additional taxes if RMDs are missed. Please see your tax advisor regarding your specific situation.

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
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