HOW TO CREATE Income for Life

Having a paycheck you can depend on in retirement is more important than ever.

- SANDRA BLOCK

DURING PERIODS OF ECONOMIC UNCERTAINTY, a paycheck is the ultimate antidote to stress. As long as you’re getting paid, you can buy groceries, pay the mortgage and—one of these days—catch a ball game.

Unless you’re fortunate enough to have a traditional pension, though, those paychecks stop when you retire. That’s unnerving even when times are good. When the stock market is unpredictable, interest rates are at an all-time low and the economy is reeling, the absence of a biweekly or monthly deposit in your bank account can lead to a lot of sleepless nights.

If you’ve saved diligently, you can still convert your nest egg into a reliable source of income that will cover your basic needs, along with those vacations you hope to take when it’s safe to travel again. But to reduce the risk of outliving your savings, you may need to revisit and revise some of the old rules of thumb.

TAPPING YOUR ACCOUNTS

One of the biggest challenges facing retirees is figuring out how much they can withdraw from their individual retirement accounts, 401(k) plans, taxable accounts and other savings each year and still have enough to maintain their standard of living if they live into their nineties (or beyond). This prospect is so daunting that some retirees are overly frugal, scrimping on expenses even when they have plenty of money in their nest eggs. A study by the Employee Benefit Research Institute found that people with $500,000 or more in savings at retirement spent down less than 12% of their assets over 20 years on average.