Three Ways to Simplify Retirement Income Planning

Having enough money to live comfortably in retirement is the primary saving and investing goal for most Americans. Retirement means different things to different people — it can be a time to travel, spend more time with family or pursue a personal passion. But while we look forward with anticipation to finally reaching that goal, flipping the switch from working and having a steady stream of income to tapping into decades’ worth of hard-earned savings can be very overwhelming, confusing and let’s face it — scary.

According to a recent survey* from the investment firm Charles Schwab, 52% of Americans within five years of retirement feel overwhelmed by how they will manage different income sources once they make the transition into retirement. With 10,000 Baby Boomers turning 65 every day**, people need help turning their savings into steady income and making their money last in retirement.

Schwab’s survey also found that nearly three-quarters of pre-retirees are worried about running out of money in retirement, so if that idea scares you, you’re not alone.

Fortunately, there are some steps you can take to better manage your income needs in retirement:

  1. Have a plan about how much you can spend in retirement. Schwab’s survey found that retirement income planning is more overwhelming than other financial topics often considered stressful including the financial impact of losing a job, buying a home or paying for college. Mapping out a plan for how much money you’ll need, how to strategically withdraw money along the way and how to manage your investment portfolio will give you more confidence that you’re on the right path. You wouldn’t go on a long road trip without mapping out your journey — approach your retirement the same way.
  2. Think about how to invest. Just because you’ve hit retirement and are starting to draw down from your savings doesn’t mean you should stop investing. A portion of your assets should remain invested in order to help contend with inflation and make your money last in retirement. Half of the pre-retirees surveyed by Schwab admit they find it difficult to know how to invest, so for some people it might help to get investing guidance from a professional.
  3. Don’t forget about taxes. According to Schwab’s survey, 70% of pre-retirees are unfamiliar with the tax implications of withdrawing money from their retirement accounts. How you manage tax obligations will depend on your specific situation, but it can be important to think about diversifying your account types, including tax-deferred, taxable and tax-free Roth IRA accounts. And don’t forget about required minimum distributions from retirement accounts.

To help meet the needs of people making the transition into retirement and to simplify the steps above, Charles Schwab & Co. Inc. recently launched Schwab Intelligent Income™, an automated income solution available with Schwab Intelligent Portfolios, designed for people who want a simple, modern way to pay themselves in retirement, or any other time, from their investment portfolios. For those who want a comprehensive financial plan and unlimited guidance from a Certified Financial Planner™ professional, Schwab Intelligent Income is also available through Schwab Intelligent Portfolios Premium™.

Schwab Intelligent Income helps answer critical and often complex income-related questions about how much to withdraw, how to invest based on individual goals, risk tolerance and time horizon, and how to withdraw from a combination of taxable, tax-deferred and Roth enrolled accounts in a tax-smart and efficient way.

So much of the focus is on savings and investing for the future, and rightfully so, but having a plan in place to manage your savings once you hit your golden years is equally important.

More information about Schwab Intelligent Income is available here.

*Online survey of 1,000 Americans aged 55 and older with $100,000 or more in investable assets. Respondents self-defined as within five years of retirement.

**Pew Research survey

Please read the Schwab Intelligent Portfolios Solutions™ disclosure brochures for important information, pricing, and disclosures related to the Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium programs.

Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ are made available through Charles Schwab & Co. Inc. (“Schwab”), a dually registered investment advisor and broker dealer. Portfolio management services are provided by Charles Schwab Investment Advisory Inc. (“CSIA”). Schwab and CSIA are subsidiaries of The Charles Schwab Corporation.

Schwab Intelligent Income™ is an optional feature for clients to receive recurring automated withdrawals from their accounts. Schwab does not guarantee the amount or duration of Schwab Intelligent Income withdrawals nor does it guarantee any specific tax results such as meeting Required Minimum Distributions.