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Develop a retirement
income strategy

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

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 3 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.

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
Traditional IRAs require
a certain amount be
withdrawn each year
past age 72Footnote *

Determine your Required Minimum Distribution (RMD)

RMDs are amounts that the federal government requires you to withdraw annually from your retirement plans after age 72Footnote *. Traditional IRAs require a certain amount be withdrawn each year past age 72Footnote *, 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.

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If you were age 70½ or older as of 12/31/2019, you would be required to take a required minimum distribution ("RMD") for 2019. Effective 1/1/2020, in accordance with new legislation, the required beginning date for RMDs for individuals who turn age 70½ on or after 1/1/20 is age 72. You may defer your first RMD until April 1st in the year after you turn age 70½ or 72, as applicable, but then you'd be required to take two distributions in that year.
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 2 Source: Merrill Lynch Investment Management & Guidance calculations based on Social Security Administration calculator at - accessed April 2016. Full Retirement Age is the age at which a person may first become entitled to full or unreduced retirement benefits.

Footnote 3 Asset allocation does not assure a profit or protect against a loss in a declining market.

Neither Merrill nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.