Create a replacement income in retirement

You’ve spent years putting away money so that, one day, you’ll be able to retire. Now that time is near, what you’ve saved is no longer a nest egg—it’s the source to fund your vision of retirement. And you can turn your savings and investments into a source of steady, monthly retirement income with a detailed income plan.
 
1. Picture your lifestyle
First, think about the lifestyle you want in retirement.

This includes thinking through how you will spend your time in retirement, where will you live, what is most important to you, what will your family look like, what are your preferences, what are some of the concerns, etc. Discuss with your partner to get a clear understanding on these important topics to make sure you have a clear
 
2. Determine your expenses and how much your lifestyle will cost
Some people aim to replace between 80% and 100% of the income they received while working; your exact retirement cash flow needs will depend on your lifestyle goals and personal situation. To get a better estimate, start with a budget worksheet separating essential or everyday expenses from those that are more discretionary—separate the needs from the wants.
1

Calculate essential living expenses

Include the cost of essentials such as housing and household expenses, food and clothing, healthcare, transportation, insurance, taxes and loans.
2

Be realistic about discretionary expenses

Plan right and you can also indulge in the things you enjoy most. This may include travel, hobbies and clubs, socializing, volunteering, starting a business, or leaving gifts for the next generation.
3

Account for changes over time

Expenses may increase with inflation, or simply change with age. For example, more of your budget may be used for discretionary travel early on. But it may shift toward essential healthcare costs as you age.
3. Understand your monthly retirement income and make a plan
You may have multiple savings and investment accounts, plus Social Security. All can pay you back in retirement, but each works in different ways.

If you're within 10 years of retirement and you’re a TIAA plan participant, you can log in to use our Retirement Income Planner to explore your income options and learn how to help maximize your income payouts. You have been saving all these years.  Do you know how much income you can generate?

If you're unsure about how to best utilize and combine various sources of income, a detailed income plan can help give you a sense of your estimated income and your anticipated needs. A good income plan will identify what combination of income choices is right for your current situation, and build in the flexibility for changes as your vision for retirement evolves. Here are the basics:
1

Estimate Social Security income

Along with Social Security, evaluate other sources of reliable income (such as employer-sponsored pensions). This could become the base of your “income floor” to cover budget essentials.
2

Consider covering gaps with income you can’t outlive

If existing sources of guaranteed income fall short of paying your expenses, consider using a portion of your savings to create lifetime income from an annuity to help bridge the gap.
3

Be smart about withdrawals

A dynamic approach to withdrawing from your investment portfolio, may allow you to respond to changes in the market and provides the flexibility and growth potential needed to cover discretionary expenses.
4.  Pay attention to Required Minimum Distributions (RMDs)
As of January 1, 2020, once you turn 72, the IRS requires you to begin taking minimum distributions or face a penalty of up to 50% of the distribution. To reduce the risk of penalty, consider setting up a minimum distribution withdrawal option paying the required amount each year while your savings continues to grow.
 
5.  Take taxes into account
To maximize tax advantages, consider drawing first from the savings in taxable investment accounts, leaving any earnings in the retirement accounts to be tax deferred (or in the case of Roth IRAs, potentially tax free).
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