by Emily Hechler 
Retirement is a milestone many look forward to achieving. Your years of hard work and dedication finally pay off. To make your money pay off as much as possible, you need a retirement income plan. This allows you to strategically pay yourself with your retirement savings to fund your relaxing retirement years. Here’s how to create a retirement income plan.
Planning Your Retirement Age
Many Americans begin collecting Social Security benefits as early as age 62, although waiting longer can increase your monthly benefit.
While it’s up to you when you retire, remember that retiring earlier comes with financial consequences. First, you won’t be earning your typical income as long as you may be able to. Second, you won’t get as much money from Social Security. Finally, you’ll have to rely more on your retirement savings to sustain your lifestyle.
Many financial experts estimate that retirees may need between 70% and 80% of their pre-retirement income to maintain a similar lifestyle, although individual needs vary. This is because it’s assumed that you won’t have high, if any, debt payments during your retirement and you won’t be contributing to your retirement savings anymore. This calculation assumes you will maintain a similar lifestyle in retirement, with spending and expenses close to what you had before retiring.
Delaying Social Security benefits can increase the amount you receive each month, potentially reducing the amount you need to withdraw from your retirement savings.
Creating Your Retirement Income Plan
Before deciding where your retirement income will come from, start with three basic steps:
- Estimate your retirement expenses.
Calculate how much you’ll need each month to cover housing, food, healthcare, transportation, and other living expenses. - Identify your guaranteed income sources.
Determine how much income you’ll receive from sources such as Social Security, pensions, or annuities. - Calculate the gap.
Any expenses not covered by guaranteed income will need to come from retirement savings, investments, or other sources of income.
Once you understand these three pieces, you can build a withdrawal strategy that helps support your lifestyle throughout retirement.
Understanding Your Income
During retirement, your income comes from different sources than it did while you were working. Instead of receiving a paycheck from an employer, your retirement income may come from Social Security, retirement accounts, pensions, annuities, or other investments.
Retirement income is broken into two types, guaranteed retirement income and non-guaranteed retirement income.
Guaranteed Income
Guaranteed retirement income generally provides predictable payments that are not directly tied back to stock market performance. This makes it dependable for paying your essential bills, like housing, food, and insurance.
There are three main types of guaranteed retirement income.
Social Security
Most workers who have earned sufficient Social Security credits are eligible to receive monthly Social Security benefits in retirement. A perk of Social Security paychecks is that the amount adjusts with inflation. As of 2026, the average Social Security payment is $2,071 per month.
Pension
Pensions aren’t as common as they were, with many employers now offering 401(k)s and other retirement savings plans instead. Some employers require the employee to contribute to the pension, while others don’t. The amount of money you receive from a pension often depends on your pre-retirement income and length of service with the company.
Annuities
An annuity is a contract with an insurance company that can provide income payments in exchange for a lump-sum investment or series of contributions. If you choose a fixed-term annuity, you’ll receive your investment back with interest during your payout term. If you choose a lifetime annuity, you’ll receive a payout for the remainder of your life. No matter which type of annuity you choose, it’s a guaranteed stream of income for your term. Many annuities also offer survivor benefits, so your spouse can receive the income every month after you pass.
Non-guaranteed Income
There are several different types of non-guaranteed income. The amount of income you’ll receive from these sources depends on the market.
401(k) or 403(b)
401(k) and 403(b) plans are common retirement plans for employees to pay into today. Many employers offer a match to help you boost your savings. Be mindful that your employer can withdraw their match if you don’t stay employed with the company for the required time period. Many choose to roll their 401(k) funds into an IRA as they transition between jobs to keep saving.
IRAs
IRAs, or Individual Retirement Accounts, will be taxed at different times, depending on the type of account. IRA accounts can be independent of your employer. Alltru offers traditional and Roth IRA accounts to help you meet your savings goals.
Other Investments
Some also invest in other types of investments like stocks, bonds, mutual funds, or brokerage accounts. The amount of money you can get back from these accounts varies depending on the market.
Continuing Employment
Even after retiring, some choose to pick up a part-time job to keep themselves busy and to get extra money. If you want a part-time job when you retire, consult with a tax professional, as this increase in income may change how your retirement income is taxed.
Combining Your Income
With so many options and tax implications, it can be hard to determine how much money to withdraw from what accounts at what time. That’s where a certified financial planner comes in. They can help you create a retirement income plan to strategically withdraw guaranteed and non-guaranteed income so you can safely afford to retire.
Creating a Budget
Finally, you should create a budget based on your retirement income plan. This budget should cover your basic needs, then some non-essential expenses, and finally some buffer in case unexpected situations arise. Check out our blog about what type of expenses to expect in retirement.
If you have any outstanding debt, work with your financial planner to pay off this debt as quickly and safely as possible. High interest rates can quickly eat into your retirement savings.
Getting Started
Now that you understand why you need a retirement income plan, how it works, and how to use it, you’re ready to create one. Alltru works with certified financial planners to help you create a savings plan and withdrawal strategy to fuel your retirement. Schedule your appointment now to start planning.
