Designing an Income Strategy for a Comfortable Retirement | Allworth Financial

Retirement is a time to enjoy the fruits of your labor, but to do that with confidence, you need a solid plan for how you’ll generate income. After years of saving and investing, shifting to “spending mode” can feel unfamiliar—and even a bit nerve-wracking. But with the right strategy, you can enjoy your retirement without worrying about whether your money will last.

A well-designed income strategy considers your unique goals, the current tax laws, and the best way to make your money work for you. Here’s how you can take the first steps toward building a plan that aligns with your vision for a comfortable retirement.

Step 1: Understand Your Income Sources

The first step in designing a retirement income strategy is understanding where your money will come from.

Most retirees rely on a mix of sources, such as:

• Social Security: For many, Social Security is a foundational income stream. In 2025, the average monthly benefit is $1,927, but your exact amount depends on your earnings history and when you start claiming benefits. Delaying Social Security past full retirement age (FRA) can boost your monthly payout by 8% per year up to age 70.
• Retirement Accounts: Withdrawals from accounts like 401(k)s, IRAs, and Roth IRAs often make up a significant portion of retirement income. Each has its own tax implications, which we’ll cover below.
• Pensions: If you’re lucky enough to have a pension, this can provide a predictable income stream.
• Investments and Savings: Dividends, interest, and other investment returns can supplement your other income sources.
• Part-Time Work: Some retirees choose to work part-time, whether for extra income or to stay engaged.

Understanding how these sources fit together is key to creating a sustainable income plan.

Step 2: Plan for Tax-Efficient Withdrawals

Taxes don’t stop in retirement, and your withdrawal strategy plays a big role in how much you keep versus how much goes to Uncle Sam.

Here’s a general framework for tax-efficient withdrawals in 2025:

• Start with Tax-Free Income: If you have a Roth IRA, consider using it strategically. Roth withdrawals are tax-free, making them a great option when you want to avoid pushing yourself into a higher tax bracket.
• Tap Tax-Deferred Accounts Wisely: Withdrawals from traditional IRAs and 401(k)s are taxed as ordinary income. You’ll need to start taking required minimum distributions (RMDs) at age 73 (or age 75 for those born in 1960 or later). Be mindful of how these withdrawals impact your overall tax situation.
• Balance with Taxable Accounts: Investments in brokerage accounts can be a flexible income source. Only the gains are taxed, and they’re subject to favorable capital gains rates if held for more than a year.
• Consider Qualified Charitable Distributions (QCDs): If you’re over 70½ and charitably inclined, you can donate up to $100,000 directly from your IRA to a qualified charity. This satisfies your RMD and avoids taxes on the distribution.

The goal is to withdraw strategically to keep your taxable income low and make your money last.

Step 3: Align Your Spending with Your Goals

Your income strategy isn’t just about the numbers—it’s about what you want your retirement to look like. Are you planning to travel extensively? Spend more time with family? Pursue hobbies you’ve always loved?

Knowing your priorities helps you create a realistic spending plan. Start by estimating your expenses:

• Essential Expenses: These include housing, utilities, food, and healthcare.
• Discretionary Expenses: Think travel, hobbies, dining out, and other “fun money.”
• Unexpected Costs: Build a buffer for the unexpected, like home repairs or medical expenses not covered by insurance.

A good rule of thumb is the 4% withdrawal rate, which suggests you can withdraw 4% of your portfolio annually and have it last 30 years. However, this isn’t a one-size-fits-all solution, especially with inflation and market fluctuations. Your spending should adapt to your goals and circumstances.

Step 4: Plan for Longevity and Inflation

One of the biggest concerns retirees face is outliving their savings. With people living longer than ever—many into their 90s—your income strategy needs to account for longevity.

Inflation is another key factor. In 2025, inflation rates have stabilized somewhat, but costs like healthcare continue to rise faster than general inflation. Building in annual spending adjustments to keep up with the cost of living is essential.

Strategies to protect against longevity and inflation include:

• Investing a portion of your portfolio in equities for growth.
• Considering annuities that provide guaranteed income for life.
• Reviewing your plan annually to make necessary adjustments.

Step 5: Work with a Trusted Advisor

Designing an income strategy that balances your needs, goals, and tax considerations is complex—but you don’t have to do it alone. A trusted financial advisor can help you create a personalized plan that gives you confidence and peace of mind.

Final Thoughts: Your Income, Your Future

A comfortable retirement starts with a well-thought-out income strategy. By understanding your income sources, withdrawing strategically, aligning your spending with your goals, and planning for the unexpected, you can enjoy the retirement you’ve worked so hard for.

If you’re ready to start building your income plan—or want a second opinion on the one you have—I’d be happy to help. Let’s work together to make sure your retirement is as secure and fulfilling as you’ve always dreamed.