Distribution Planning: Turning Savings into Retirement Income

Most of us spend decades working hard and building our savings. This phase is often called the accumulation stage, or the time when you’re growing wealth through consistent contributions, investment growth, and compounding returns. But once retirement arrives, the game changes. The focus shifts from building your nest egg to carefully managing how you withdraw and distribute those savings to create an income stream that lasts throughout your life. This is the distribution stage, and it comes with its own unique challenges and opportunities.

The Shift from Accumulation to Distribution

During accumulation, your primary goals are saving, investing for growth, and protecting against risks that could derail your progress. Success is generally measured by how large your accounts grow over time.

But retirement flips the script. Instead of simply asking, “How much can I grow my portfolio?”, you now need to answer questions like:

• How do I turn my savings into monthly income?
• Which accounts should I draw from first to manage taxes?
• How do I protect my income against inflation, market volatility, and longevity risk?

Without a thoughtful distribution plan, retirees risk running out of money too soon or conversely, underspending and missing out on enjoying the lifestyle they worked hard to create.

Key Elements of a Great Retirement Income Plan

A strong distribution plan balances your need for income today with the goal of preserving wealth for the future. Here are the critical components:

1. Withdrawal Strategy

Which accounts you draw from—and in what order—can have a significant impact on how long your money lasts. A smart withdrawal strategy coordinates taxable accounts, tax-deferred accounts (like IRAs and 401(k)s), and tax-advantaged accounts (like Roth IRAs) to minimize taxes over time. For many retirees, blending withdrawals from multiple account types creates the most efficient outcome.

2. Income Floor and Flexibility

Your plan should establish an “income floor”—a reliable stream that covers essential living expenses, often using Social Security, pensions, or other income such as real estate, etc. From there, flexible withdrawals from investments can fund lifestyle and discretionary spending. This combination helps you establish consistent income so you can enjoying your time freedom in retirement.

3. Tax Planning

Taxes don’t stop when you retire, they just look different. Strategic Roth conversions, managing Required Minimum Distributions (RMDs), and carefully timing Social Security benefits can significantly reduce your lifetime tax bill. A well-designed distribution plan looks beyond one year at a time and maps out strategies that consider taxes over decades.

4. Risk and Market Protection

Even in retirement, market downturns happen. A thoughtful income plan considers how to weather volatility, whether that’s keeping cash reserves, using a “bucket strategy” for investments, or maintaining a balanced portfolio that can handle both growth and stability needs.

5. Longevity and Legacy Planning

Finally, distribution planning should account for longevity, seeking to create an income that lasts as long as you need it. It also integrates estate and legacy planning, making sure your wealth transfers smoothly to loved ones or causes you care about.

Final Thoughts

Information in this material is for general information only and not intended as investment, tax, or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.