How do I make my money last?

Having sufficient income to last the duration of your retirement can be just as important as deciding when to retire.


Maximize your highest earnings years

The Internal Revenue Service (IRS) allows individuals over age 50, during what will likely be peak earning years, to increase or catch up retirement savings in a variety of ways. Understanding all your options can help you maximize contributions as you near retirement.


1 in 4
65-year-olds will live to age 90

The IRS allows catch-up contributions to retirement accounts if over age 50


IRS catch-up provisions for 2018. Visit for additional rules and regulations regarding retirement contributions.


If you are eligible to contribute the maximum amount to a 401(k) or 403(b) and your adjusted gross income is under $120,000 (single) or $189,000 (married, filing jointly) in 2018, you may also maximize contributions to a Roth IRA.


Don’t underestimate the impact of large drawdowns

The chart shows how radically different an investor’s wealth profile can look if they take a large withdrawal or experience a large market downturn early in retirement. Spend too much or suffer a big loss early and an investor could run out of wealth much sooner.

Potential large drawdowns

  • Health care expenses
  • Market fluctuation
  • Family emergency
  • Large purchases

Hypothetical Example: Assume a $1M beginning balance at retirement, a 5% return annually with the exception of a significant downturn in the third year of retirement (-30%, -20% and -10%), and a $45K withdrawal adjusted 3% each year for inflation.

Hypothetical Example: Age When Investor Could Run Out of Wealth if a large drawdown occurs in the first three years of retirement


American Psychological Association, "Older Adults, Health and Age Related Changes,"


Establish spending discipline

Significant withdrawals from your retirement or savings accounts can have a large impact on how long your assets will last. The behavioral flaw of instant gratification will likely have a negative impact on a portfolio’s ability to generate cash flow over a lengthy retirement period. Oftentimes, spending is about trade-offs. Prioritizing cash flow needs can help investors make a rational, informed decision.

Align your spending discipline with your expenses to help create a realistic budget and make good spending decisions.


Create a cash flow strategy

Once you have estimated retirement expenses, the next step is to audit all accounts and understand how much is invested in equities, fixed income, cash and other investments.

Ensure that the allocation is appropriate in terms of risk tolerance and ease of access. It may be good to review with a financial advisor. One way to think about asset allocation is from the viewpoint of creating income in retirement. Looking at the portfolio from this perspective can help you invest to help meet your cash flow needs in retirement. The Three Tiers of Retirement Income is a framework that can help.


The Three Tiers of Retirement Income

Investors looking for income in retirement may benefit by implementing an entirely different approach to their investment decisions. Start by acknowledging that income and yield are two different concepts. Income represents total cash flow inclusive of Social Security, pensions, royalties and rental income and is what helps retirees meet their essential household expenses. Yield, meanwhile, is related to the income a particular investment pays. While yield can be helpful in evaluating specific investment opportunities, investors are likely to be much better served by an income-based strategy.

The Three Tiers of Retirement Income strategy aligns income needs with investments that can help meet those needs.

TIER 1: Anchor Income

TIER 1: Anchor Income

Essential Expenses

May be used to meet essential needs in retirement; can generally be relied on regardless of market or economic conditions.

Many retirees may find peace of mind when their anchor income sources are equal to their essential household expenses. If there is a shortfall, it may be wise to use a portion of their existing portfolio to purchase an investment product that will provide the necessary additional monthly income.

Anchor Income Examples:

Hypothetical Example: Cash Flow Needed to Meet Essentials Needs

TIER 2: Cushion Income
TIER 3: Yield


A solid income strategy that is needs-based can help create peace of mind in retirement regardless of the market or economic environment.


Be tax aware

Your tax situation in retirement will be impacted by the account from which you withdraw. For example, withdrawing from a traditional IRA tax-deferred account will mean that you generally will pay taxes on the amount withdrawn for that tax year. However, withdrawing from a taxable account may help reduce taxes as retirees cross into higher tax bracket breakpoints, and withdrawing from an eligible Roth IRA may be tax free. The type of accounts and order of withdrawals matter. See how the withdrawal strategy of a retired couple looking to live on $100,000 a year can save on potential taxes.


Hypothetical Example Shareholders: Fred and Linda



When is the right time to retire?


What do I need to know about Social Security?