5 Steps to Establish a Steady Income in Retirement

While your work may come to an end when you retire, your expenses won't. You’ll need to cover everyday expenses like housing, food and clothing, and you’ll want money for the things you couldn’t do as often while you were working, like travel, eating out and trying new activities.

Take these steps to build the reliable income you’ll need to live on.

Step 1: Be Ready to Cover Emergencies

Having an emergency fund makes good financial sense no matter what age you are. When you’re working, this money gives you a cushion in case you run into unexpected expenses or you lose your job.

When you’re retired, an emergency fund gives you options if your investments aren’t performing well. If the market is down, you can decide if you want to pull funds from your emergency fund and wait for a rebound. You don’t have to tap into your investments.

Step 2: Calculate Your Guaranteed Retirement Income

You can get an estimate of your Social Security income and see how that income changes based on when you want to start collecting. You should also be able to find out how much you can expect from any pension and annuities. 

This income can help you cover essential expenses, so you know how much you have to live on if your investments fluctuate a lot.

Step 3: Prepare to Cover Your “Bridge”

Many people retire before they can collect their full Social Security benefits or any pensions. You might want to “bridge” this gap by investing some of your portfolio in CDs or annuities while keeping the rest invested for longer-term needs. 

Step 4: Review Your Other Income Sources

Do you plan to work part-time or start a side business during retirement? Will you downsize and rent out your existing home? You’ll want to figure in any other income you expect and how long you think it will last. For example, you may only want to work part-time until your spouse or partner retires. But you may be able to plan on retirement income indefinitely.

Step 5: Factor in Your Investment Portfolio

You probably have money invested for retirement in accounts such as a 401(k), individual retirement account (IRA) and Roth 401(k) or IRA. You may want to withdraw money from these accounts while making sure you leave enough to cover the expenses you’ll have in the future.

Aim to withdraw no more than 4% of your savings in the first year of retirement, and then adjust that amount for inflation every year after that. So, if you’ve saved $400,000, you may want to consider withdrawing $16,000 to $20,000 in the first year.

Are You Ready to Retire?

It can be hard to estimate your income and expenses during retirement, and you may be looking for answers to questions like what a good monthly retirement income is for a couple. At Farm Bureau, we’re experienced in helping people plan for and navigate retirement. Reach out to one of our financial advisors and find out if you’re on track.