Five top retirement tips—how to move from savings to retirement

As retirement approaches, the shift from accumulating savings to relying on those savings for income becomes a crucial phase. Conventional wisdom about retirement planning may tell you the best strategy may simply be to invest sensibly, save, and delay retirement if possible, but you should also consider what your income needs will be in retirement. To pave the way for a smooth transition, it's essential to adopt a strategic approach to how you structure your income and manage your portfolio to ensure you’re adequately covered during your retirement years.

Here are some tips to move your thinking from saving for to living in retirement. 

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1. Estimate your expenses and create a budget

Establishing a detailed budget is the first step in understanding your financial landscape in retirement. By identifying your essential expenses, such as housing, healthcare, and basic living costs, you can get a general sense of how much you will need. However, since it can be difficult to know an exact amount due to many unforeseen factors (inflation, unexpected health issues, etc.), it may be more useful to think about it in terms of income, rather than focusing on a target number. Here are some questions you might ask yourself:

  • What are my monthly expenses, and am I able to cover them?
  • Do I plan to downsize? Or would I like to treat myself to some luxuries in retirement?
  • Do I want to travel?
  • Do I want to leave a legacy to my family?
  • How will my savings fare against inflation?

While having a general sense of what your monthly expenses might be in retirement can help to provide a clearer picture of your financial needs and can help you make more informed decisions about your discretionary budget, your needs will inevitably change. Make sure you evaluate your withdrawal rate with your financial professional at least annually to ensure that you’re not drawing too much or too little and are taking life changes into account.

What is the 70–80% spending rule?

Some experts suggest using the 70–80% spending rule to determine how much income you will need in retirement. This simply means that you will probably need to replace 70–80% of your preretirement income through savings and Social Security. While a study of actual retirement costs found that spending in retirement could range anywhere from 54–87%, most retirees use 70% or less of their former income.1


2. Mind your investment portfolio

In saving for retirement, you’ve probably invested in several different accounts in order to diversify your investments. While the idea is to typically invest more aggressively when you’re younger (when you have more time to weather market fluctuations) and scale back to more conservative investments as you approach retirement age, you don’t want to overdo it.

Even in retirement, maintaining a diversified investment portfolio is essential for managing risk and maximizing returns. If you make your portfolio too risk-averse, over time inflation could eat away at your investments. (Retirement can last for decades, after all.) Consider a balanced mix of stocks, bonds, and other assets based on your risk tolerance and financial goals. You also want to make sure to utilize both taxable and tax-advantaged accounts, if possible, to maximize your strategy.

Related: Tax efficient investment strategies

Investing in annuities or dividend-paying stocks can also be a good way to help increase your income stream during retirement. With annuities, your money potentially grows over the long term, with the option to convert them into a guaranteed income stream. Payments on a fixed annuity generally involve a return of principal. Annuities can also provide a payout for your loved ones if you pass away before you have annuitized the investment. Below are some common types of annuities you might consider:

  • Fixed deferred annuities
    Offer long-term, low-risk options that grow at a guaranteed rate, with no taxes due until withdrawal.
  • Variable annuities
    Offer a range of professionally managed investment options, with potential for tax-deferred growth and some access to your money. Market risk is involved with variable annuities.
  • Hybrid variable annuities
    Combine the certainty of a fixed index-linked account, which does not lose value, with the flexibility and growth potential of a variable annuity. Market risk is involved with the variable investment options.

Related: Grow and protect your savings with annuities


3. Leverage tax-efficient withdrawal strategies

The tax implications of withdrawing funds from various retirement accounts can impact the longevity of your savings. While it’s generally advisable to tap into taxable savings before tax-advantaged retirement accounts—speaking with a financial professional who understands the tax implications of different account types, such as traditional IRAs, Roth IRAs, and taxable accounts, can help ensure that you employ a tax-efficient withdrawal strategy. Additionally, they can also help you periodically review and adjust your portfolio to adapt to changing market conditions and address your evolving needs as you age.


4. Explore Social Security strategies

Social Security benefits are one of the few sources of guaranteed income you can rely on for the rest of your life, so understanding how to optimize your Social Security benefits is a key aspect of retirement planning.

While the earliest you can start receiving Social Security is 62, if you claim at this age your monthly payments will be reduced. Waiting until full retirement age (66 or 67, depending on when you were born) ensures that you receive your full benefit amount. Additionally, for each year you delay receiving your benefits (up to maximum age 70) you can increase your benefit payments by as much as 8%, so it’s generally advisable to wait as long as possible.

However, deciding when to take Social Security is an individual decision—depending on your health, marital, and financial status. So it’s important to weigh the pros and cons of when to start receiving benefits based on your individual circumstances. Consider consulting with a financial professional to develop a strategy that aligns with your overall retirement plan.

Related: Make the most of your Social Security benefits


5. Evaluate healthcare coverage

Healthcare costs can be a significant factor in retirement. According to the 2022 Fidelity Retiree Health Care Cost Estimate, the average retired couple at age 65 can expect to spend around $315,000 on healthcare expenses in retirement.2 With out-of-pocket expenses and Medicare premiums on the rise, it’s important to ensure that you have a comprehensive understanding of your health insurance options, including Medicare coverage, when estimating your healthcare needs.

You might consider contributing to a Health Savings Account, which can provide a tax-advantaged resource that can be used to help cover qualified medical expenses such as co-pays, co-insurance, and prescription drugs. Generally, Health Savings Accounts offer three major tax advantages:

  • Contributions are tax deductible.
  • You don’t pay taxes on contributions.
  • If you choose to invest your funds, you don’t pay taxes on your earnings.2

Of course, it’s important to research the rules of your Health Savings Account, as they can vary.

You may also want to consider supplemental insurance policies to fill potential gaps in coverage. Speaking to a financial professional can help ensure that you’re adequately covered for any potential out-of-pocket expenses. Proactive planning in this area can help protect your savings from unexpected medical costs that could arise in the future.

Transitioning from savings to retirement may seem daunting, but with some careful planning it doesn’t have to be. By creating a detailed budget, maintaining a diversified investment portfolio, optimizing Social Security benefits, evaluating healthcare coverage, and implementing tax-efficient withdrawal strategies, you can navigate this financial transition with confidence and set the stage for a fulfilling and financially secure retirement.

Retirement income planning tips FAQs

Retirement income refers to the funds and resources a person receives after retiring from employment, often derived from pensions, savings, investments, and Social Security.

Common sources include pensions, 401(k)s or other retirement accounts, Social Security benefits, annuities, and personal savings.

Social Security provides a regular income stream for retirees based on their work history. The amount received depends on factors such as earnings and the age at which benefits are claimed.

A pension is a fixed sum paid regularly to a retired employee. It's often based on years of service and the average salary during the employee's highest-earning years.

Personal savings, including individual retirement accounts (IRAs) and other investments, provide a financial cushion and flexibility in retirement. They can supplement other income sources.

Healthcare costs can be significant in retirement. Understanding Medicare, long-term care insurance, and planning for potential medical expenses is crucial for financial stability.

Annuities are financial products that provide a steady income stream. They can be purchased from insurance companies and offer various options, such as fixed or variable payouts.

The 4% rule suggests withdrawing 4% of your retirement savings annually to sustain a 30-year retirement. It's a guideline to help balance spending and preserve savings.

Understanding tax implications on different income sources is vital. Strategies like Roth IRA conversions and managing withdrawals can optimize tax efficiency.

Mistakes include underestimating expenses, not adjusting investment strategies for retirement, and failing to account for inflation. Regularly reviewing and adjusting your plan is essential.

Diversifying investments, considering inflation-protected securities, and periodically adjusting withdrawal strategies can help protect against the impact of inflation.

Yes, many retirees choose to work part-time for various reasons, including supplementing income, staying socially engaged, and pursuing interests.

Planning, saving consistently, staying informed about financial matters, and regularly reassessing your retirement plan are key steps toward ensuring a comfortable retirement lifestyle.


Want to learn more about planning for retirement?

A New York Life financial professional can help determine what’s right for you.

1“What Percent of Your Current Income Will You Need in Retirement?,” Fifth Third Bank, 2023.

2Trina Paul, “Medical Costs Can Eat Up a Sizeable Portion of Your Retirement Savings—Here’s How Much You Should Expect to Spend,”, July 30, 2023.