Retirement Income- One Size Fits All?

Retirement Income- One Size Fits All?

February 10, 2023

“Retirement is wonderful if you have two essentials – much to live on and much to live for.”

– Author Unknown

As you approach retirement, there are many choices that come along that can be difficult to navigate without professional guidance.  

Research shows that most people underestimate how long they will live in retirement.  Most of us desire to have our quantity of life correspond with quality of life.  Not too many generations ago, longevity and retirement savings weren’t a pressing concern.  Life just wasn’t as long!  

Medical advancements have helped many live longer, but for some, the constant medical intervention has delivered quantity, but not always quality. 

I recently watched a documentary about a new frontier of gerontology aimed at enhancing the quality of our longer lives.  It is exciting to think about.  However, it is also something to plan for.

For most people, the working years are spent diligently saving and investing when possible, to prepare for the day that the accumulated assets will be turned into income- like winter snow on the mountains warming and flowing down into the rivers.

The choices for how to take that retirement income are not one-size-fits-all.  You may hear about different retirement income strategies and second guess the choice you’ve made. 

It all comes down to your retirement income personality.  

One such choice is the annuity.  While many steer clear of annuities due to their complexity, they do have a place in a retirement income strategy for certain people.  One of the attractions of annuities is guaranteed income of some amount, for life.  

Guarantees can sound good to people who do not have tolerance for traditional investment gyrations, and are modest in their goals and needs.  This confidence can be extremely valuable to some retirees and fulfill their income requirements.  

However, there are drawbacks to this strategy.  As an annuity salesman said to me, it’s not that it’s too good to be true, it’s too good to be liquid. Anything that is guaranteed comes at an additional cost.  These can be internal charges, penalties, illiquidity and inflexibility.  

This may be a tradeoff that retirees are willing to make if they are fully informed of all their options.  If a retiree may be inclined to panic and sell traditional investments at a loss, sabotaging their financial security, they may want to go with an annuity.

For investors who are familiar with the cyclical nature of investment markets, who have done financial planning, and like the flexibility and liquidity of a traditional managed strategy, a customized portfolio of stocks and bond investments has historically delivered as a vehicle for retirement income.  

If assets are sufficient, some combination of the two might be the best of both worlds.  It is very personal.

Another consideration of an income strategy is withdrawal rates.  You may be familiar with the static withdrawal rate- it is the old rule of thumb that you should withdraw no more than 4% of your invested nest egg annually, in order to increase the likelihood that you will not deplete principal too quickly and risk outliving your assets.

On a nest egg of $500,000, that would be $20,000 per year for example.  As many of you know, part of retirement planning is taking a look at social security, pensions, and any other expected income versus expenses.  

If that deficit causes you to exceed the 4% withdrawal rate, perhaps we need to take a second look at expenses, investment strategy, or both.  

A dynamic withdrawal strategy is an alternative that is frequently used, and we talk about it in years such as 2022 when we see our retirement assets decline in value and we’re looking to take some control when feeling helpless.

The dynamic withdrawal strategy is flexible, where you adjust your spending down when account values are down, and withdraw more in years when account values are up.  The idea is to bend so you don’t break.  

For example, if your account is down 15% this year, maybe the $10,000 vacation can wait until things bounce back?  Maybe you'd be fine, but flexible and conscious spending decisions can be impactful.

A final strategy I’ll mention here is a type of mental accounting called a “bucket” strategy.  

It can be entirely appropriate to have just one investment account that is composed of 2-5% cash and cash alternatives, 10-40% bonds and fixed income, and the rest in equities, depending on your unique time frame and goals.  

If you’ve gone through planning with me, you know that each asset class has its own distinct purpose based on short and long term needs.

However, it can really help some retirees to divide these three asset classes into separate accounts (buckets) and name them.  Your short term bucket of cash is for your upcoming expenses over the next 1-3 years.  

The intermediate term bucket is bonds and fixed income, and the long-term bucket is for 5-10 years and beyond.  

We refill the cash bucket cyclically with the other buckets as it is depleted by spending, pouring from one into the other as we go through the years.  

This way when markets are rough we can mentally compartmentalize the long-term bucket as completely irrelevant to whether or not we’re going to be able to pay our bills over the next few years.

The benefit of this is psychological more than anything, but whatever helps YOU be successful in retirement is completely valid and appropriate.  

If you haven’t yet sat down with me to create a plan for income in retirement, let’s do it!  



Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.  Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.  Variable annuities are subject to market risk and may lose value.

Investing involves risk, including possible loss of principal. 


Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

Securities and Retirement Plan Consulting Program services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC. Investment Advice offered through Western Wealth Management LLC, a Registered Investment Advisor. LPL Financial, Kennebec Wealth Management LLC and Western Wealth Management LLC are separate entities