How to coordinate your income sources, plan for irregular expenses, and keep your finances working through retirement.
Questions about this lesson?
Ask Joe — he can help you understand any topic covered here.
“Retirement income isn’t that complicated once you lay it out on paper. The problems happen when people don’t look at the full picture — they know what the pension pays but forget about irregular expenses, or they ignore inflation, or they miss the RMD deadline. Take an hour once a year and look at the whole thing. That one hour is worth more than most financial decisions you’ll make.”
Joe reminds members that the most valuable thing in retirement income management is having a clear, current picture of what’s coming in and going out — not sophisticated investment strategies.
Most retirees receive income from multiple sources — a pension, Social Security, and possibly a retirement savings account or other assets. Each arrives on its own schedule, has its own rules, and comes with its own tax treatment.
Managing retirement income well doesn’t require expertise. It requires a clear picture of what’s coming in, when, and from where — and a plan for handling the gaps and the irregularities that come up over time.
This lesson walks through the practical side of managing income throughout retirement, at an educational level, so you have the right foundation.
• Know your income calendar List every income source you have: pension, Social Security, any annuity payments, rental income, part-time work. Write down when each pays, how much, and to which account. This simple map is the foundation of retirement income management.
• Pension income is usually fixed Most defined benefit pensions pay a set monthly amount for life. This predictability is one of their greatest strengths. Know your exact amount, know when it arrives, and treat it as your income baseline.
• Social Security is fixed but adjusted for inflation Social Security payments receive annual cost-of-living adjustments (COLA). This makes them more inflation-resistant than a fixed pension. Know your monthly benefit amount and when it arrives.
• Retirement savings accounts (401k, 403b, 457) require decisions Unlike a pension or Social Security, money in a retirement savings account doesn’t pay out automatically. You decide when and how much to withdraw. Those decisions have tax and longevity implications that are worth understanding before you start drawing.
• Not all expenses arrive monthly A common mistake in retirement budgeting is planning only for regular monthly expenses and forgetting about the irregular ones: annual property taxes, home repairs, car replacement, dental work, travel, and family events. These are real costs that happen on unpredictable schedules.
• Estimate annual irregular expenses and save monthly for them Take stock of what irregular expenses you expect each year. Divide the annual total by 12 and treat that amount as a monthly savings line in your budget. When the expense arrives, the money is already there.
• Home maintenance deserves its own estimate A common rule of thumb is to budget one to two percent of your home’s value per year for maintenance and repairs. This varies by age and condition of the home, but having a dedicated fund prevents surprises from derailing your monthly budget.
• Healthcare costs in retirement are irregular too In addition to regular premiums, expect higher out-of-pocket years when health events occur. Having a healthcare reserve outside your regular monthly budget prevents medical costs from creating financial crises.
• Inflation is a quiet but real risk in retirement A dollar buys less each year. Over a 20- to 30-year retirement, even modest inflation meaningfully reduces purchasing power. Retirees with fixed incomes — a pension with no cost-of-living adjustment, for example — feel this effect most.
• Social Security has some inflation protection built in The annual cost-of-living adjustment on Social Security benefits provides partial inflation protection. It doesn’t always keep pace with actual living cost increases, but it helps.
• Planning for rising expenses is part of a sound retirement income strategy Expect that your expenses will cost more in 10 years than they do today. Your income plan should account for that — either through income that grows, assets that can be drawn from, or adjustments to spending over time.
• A financial professional can help model this for your situation If inflation risk is a concern for your retirement income strategy, discussing it with a qualified financial planner, such as through Financial Essentials 4 Life (FE4L), is a worthwhile step.
• Emergency savings don’t stop mattering when you retire Many people think of emergency funds as something for working years. But retirees face unexpected expenses too — health events, home repairs, helping a family member, car breakdowns. Without a reserve, those expenses come directly out of retirement income or require withdrawing from savings unexpectedly.
• Keep a separate liquid reserve Most financial educators recommend keeping three to six months of expenses in a liquid account — checking, savings, or money market — that you don’t touch except for genuine emergencies. This prevents retirement investment accounts from being disrupted by short-term needs.
• Replenish after you use it If you dip into your emergency reserve, make rebuilding it a priority before resuming any discretionary spending.
If you have money in a traditional 401(k), 403(b), 457, or traditional IRA, the IRS requires you to begin taking withdrawals at a certain age. These are called Required Minimum Distributions, or RMDs.
• What RMDs are An RMD is a minimum amount the IRS requires you to withdraw each year from certain retirement accounts once you reach the applicable age. The purpose is to ensure that tax-deferred retirement savings are eventually taxed.
• When they begin As of current law, RMDs generally begin at age 73 for most people. This age has changed over time with new legislation, so verify the current rules with your plan administrator or a tax professional when you approach that age.
• What happens if you miss one Missing an RMD can result in a significant IRS penalty. Most retirement plan administrators will notify you and can help you set up automatic withdrawals to avoid missing the deadline.
• Roth accounts are generally not subject to RMDs during your lifetime Roth 401(k) and Roth IRA accounts have different rules. If you have Roth savings, ask your plan administrator about the specific RMD rules that apply.
This is educational-level background. For guidance on how RMDs fit into your specific income picture and tax situation, consult a qualified tax or financial professional.
• Review your income picture annually Once a year, review what you are receiving, what you are spending, and whether your savings balance is moving in the direction you planned. This doesn’t need to be complex. A simple check against your plan takes an hour and can surface problems early.
• Avoid emotional investment decisions Market downturns, news cycles, and conversations with friends can all trigger the impulse to make changes to retirement savings. In most cases, staying the course — especially in a diversified, age-appropriate portfolio — outperforms reactive decisions. Before making any significant change to how your retirement savings are invested, pause and get a second opinion.
• Recognize when your income situation needs a professional review Retirement income strategies involve tax planning, Social Security optimization, investment management, and long-term projections that interact in complex ways. If your financial situation has changed significantly, if you are unsure whether your savings will last, or if you are approaching the age for RMDs, a qualified financial planner can help you work through the specifics.
Financial Essentials 4 Life (FE4L) is available to provide personalized guidance on retirement income questions that go beyond general education. Contact your Benefits Center for a referral.
Scenario: Ivan retired at 64 after 30 years as an electrician. He has a union pension, a Social Security benefit that will start at 66, and a 401(k) he has been contributing to for years. In his first year of retirement, he lives on pension income plus some savings. When he turns 66, his Social Security starts and he reduces his savings withdrawals. He checks in with a financial planner through FE4L before age 70 to understand his RMD obligations and tax situation.
Outcome: Ivan avoids a surprise tax bill from his 401(k) withdrawals, understands exactly when his RMDs start, and has a clear picture of his income for the next decade. He doesn’t have to guess.
Lesson learned: Managing retirement income is not something that just happens on its own. A clear map and periodic professional check-ins make it manageable and prevent expensive mistakes.
Planning only for monthly regular expenses and forgetting irregular ones.
Why this happens: Irregular expenses — home repairs, vehicle replacement, dental work, travel — can be substantial. Without planning for them, they come as financial shocks.
Better approach: Estimate your annual irregular expenses, divide by 12, and set that amount aside monthly.
Making reactive investment decisions when markets drop.
Why this happens: Selling investments during a market downturn locks in losses and can permanently reduce retirement savings.
Better approach: Before making any significant change to your retirement investments, pause, give yourself time, and consult a qualified financial professional.
Not being aware of Required Minimum Distributions until they are overdue.
Why this happens: Missing an RMD triggers an IRS penalty. Many retirees aren’t aware of the rule until they approach the applicable age or receive a notice.
Better approach: Contact your retirement plan administrator well before age 73 to understand when your RMDs begin and set up automatic withdrawals.
What is the purpose of a retirement income calendar?
What is a Required Minimum Distribution (RMD)?
Why is it generally a mistake to sell retirement investments when markets drop?
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