How to cover essential living expenses in retirement

Judy Worell customer story
Success story

“I’m a very, very satisfied retiree.”

Judy Worell

View From the Top

[music playing]

I grew up in New York City in Greenwich Village.

I went to Queens College and took one psychology course and said, "This is what I want to do."

From then on, I went over to the College of Education in Lexington, Kentucky. I was the first woman full professor in that department, and I was one of the first people who used the word "feminist."

I absolutely loved that job.

I was married for 26 years, and then I got divorced and I had to support myself. In those days, you had to retire when you were 70 from the university.

When I first stopped working, it was very scary and I would say to myself, "Who am I if I'm not a psychologist? What can I do?"

I thought, "Well, I could still be a psychologist by writing books on what I'm interested in."

And after I retired I wrote four books. It was very, very rewarding. That's how I developed my post-retirement career if you will.

I think it's important in any time in life to pursue your passions, and I also had a passion for music so I took cello lessons from somebody here in town, and I loved it.

I joined an exercise class, and I go three days a week. I take classes at Carnegie Center, which keeps my mind busy.

And I'm writing a novel, and I'm trying to get that published. So, I'm a very, very satisfied retiree.

But I did a lot of planning and put as much money as I could into TIAA so by the time I retired I had plenty of money to retire on.

I'm actually better off than when I was working. I think my psychology books are my legacy and producing three wonderful women who will go on to do important work in their lives.

I wouldn't do anything different.

[music ends]
After you retire, you’ll likely face a number of challenges, and having your finances squared away can help ease your mind. Here are some steps to consider taking today to help give yourself a solid financial future.

Estimate your income floor

The key to funding your expenses is to determine your "income floor." That’s the minimum guaranteed income you’ll need to cover your most basic expenses. Then, if you find a way to always keep that amount of income available, you won’t worry about running out of money, no matter how long you live.

How to determine your income floor:

1. Identify your essential living expenses. Estimate your must-have living expenses for each year of retirement. Things like food, shelter, baseline healthcare coverage and insurance. Total up the monthly costs of each expense category. These are the costs that you’ll need to cover as long as you live.
2. Estimate your Social Security and pension income. Social Security and pension plans are considered to be guaranteed sources of income. It’s important to develop a plan to get the most from them. Start with Social Security, which is your foundational income. Look at a recent benefits estimate — available on the Social Security website — to determine your approximate benefit.Your spouse/partner should also do the same.  Your monthly payment will depend heavily on when you start taking withdrawals. In general, the longer you can hold off receiving Social Security, the larger your monthly payout will be. Run a similar analysis for any pension plans you may have.
Add Social Security and pension benefits together to determine how much monthly income your household might receive.
3. Fill your income "gap." If your Social Security and pension income won’t cover all your essential expenses, you have a financial gap that you’ll need to cover. Take steps now to save more, work longer, or both.

Considering an annuity

You may also consider a source of guaranteed income in retirement, such as an annuity. Annuities are retirement products that allow you to convert a lump sum of money into a steady stream of payments that last as long as you live. Annuities are quite different than other retirement savings options because if you choose an available lifetime income option, the payments never "run out."1

A note about using your retirement savings

You'll most likely need to use your retirement savings over time, too, but there are several different ways to do so. Many people expect to simply withdraw funds from their IRA, 401(k) or 403(b) accounts to cover their monthly expenses. But that approach carries real risks.
The value of your retirement savings will likely rise and fall over time, especially if you have some portion invested in stocks. If your balance drops substantially due to a sharp bear market, continuing to withdraw the same percentage of your portfolio could eventually leave you short.
1 Guaranteed lifetime income is subject to the insurance company's claims-paying ability.
This material is for informational or educational purposes only and does not constitute a recommendation or investment advice in connection with a distribution, transfer or rollover, a purchase or sale of securities or other investment property, or the management of securities or other investments, including the development of an investment strategy or retention of an investment manager or advisor. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made in consultation with an investor’s personal advisor based on the investor’s own objectives and circumstances.
The story above describes the circumstances and experiences of a specific participant from one or more of the companies in the TIAA organization (“TIAA”).  It may not be representative of the experience of other TIAA customers and is not indicative of future performance or success. Individual results and experiences will vary.