Close up of a senior couple having breakfast

As you get further along in your career, preparing for retirement starts to become more of a focus. Ideally, you will save throughout most (or all) of your working life, building up savings for retirement budgeting and life after work. The thought of finally dipping into that retirement budget can be sobering. Spend too much, and you could run out of money when you need it most. Spend too little, and you’ll miss out on some wonderful experiences that could enhance your golden years. It’s not always easy to find the right balance, and there’s no standard advice that’s right for everyone.

There are generally three pillars that make up a retirement budget and guide your retirement spending: personal assets, Social Security, and your pension. However, having a traditional pension is a lot less common today than it once was, and Social Security, while certainly helpful, doesn’t provide a comfortable amount of retirement income on its own. This makes your personal assets much more important. Here are three tips to apply to your retirement budgeting and retirement spending that can help you maximize your personal assets and create a plan that works for you.

1. Establish retirement income beyond your personal savings.

Having one source of savings to rely on throughout retirement is restricting. Retirement budgeting is difficult when you don’t know how long your retirement will last and how much it will cost on an annual basis. Your savings will diminish no matter what, so the trick is to create an ongoing source of income that will last for the rest of your life. Having a New York Life income annuity is a reliable way to turn your personal assets into guaranteed lifetime income. Depending on the product you choose, you can purchase an annuity with a lump-sum premium or with flexible payments over time. Either way, your annuity can provide you with regular payments every month for as long as you live.

"Depending on the product you choose, you can purchase an annuity with a lump-sum premium or with flexible payments over time. Either way, your annuity can provide you with regular payments every month for as long as you live.”

2. If you’re using a savings formula, make some exceptions.

An important thing to know about retirement spending is that no single formula works for everybody. Many people follow the 4% strategy, where your annual retirement expenses are 4% of your total savings—with adjustments for inflation as necessary. This is an established strategy that is fairly rigid, favoring a specific portfolio composition of about 60% stocks and 40% bonds, which may not accurately describe your assets. It’s a logical approach to retirement spending, but it has its flaws. For one, low interest rates over the past several years suggest that it’s probably better to spend 3%, for less risk of running out of savings. Again, this shows the value of having a reliable source of income—like an annuity—included in your retirement budget.

Retirement spending tends to be uneven over the course of retirement because most retirees are more active during the first 15 years of their retirement (traveling, dining out, taking classes), and less active during the later years. Having regular income from annuities allows you to spend more confidently in a way that fits your lifestyle. You should also look beyond the retirement spending formulas and have whole life insurance coverage to protect your family should something happen to you, and to protect you (via accessing the cash value of whole life insurance) from unexpected costs that fall outside of your spending strategy if the life insurance needs decrease in retirement.1 It’s difficult to predict when a sudden medical bill or expensive home repair will strike.

3. Plan accordingly to access your savings at different times.

As retirement will ideally last 30 years or longer, you want to make retirement withdrawals in a way that maximizes the value of what you’ve saved during your career. Required minimum distributions, or RMDs, are the amounts you must withdraw on qualified assets each year once you turn 72 (those who turned 70½ before January 1, 2020, must continue taking RMDs under the rule that previously applied). The benefits of RMDs are that they may allow the percentage of wealth to increase each year with age, they encourage a balanced portfolio, and they respond to fluctuations in value because the dollar amount of your retirement withdrawal is based on the current market value of your portfolio. This can be an efficient piece of your retirement spending plan but it should still be supplemented with a source of consistent income and financial protection against unexpected medical costs—like health care expenses and extended care.

While it’s important to understand the various strategies for responsible retirement spending, no rule, table, or online calculator is a substitute for an ongoing, honest conversation with a financial professional who understands your unique situation and priorities.


New York Life has 175 years of experience guiding individuals and families through the financial decisions that matter most.

Contact us now, and we’ll match you with a financial professional who can put together a retirement spending strategy that’s personalized to fit your lifestyle.

This will reduce the death benefit and available cash surrender value.