How will you replace your salary when you retire?

WHETHER BY CHOICE OR CHANCE — an illness or layoff, for example — nearly half of us retire sooner than we’d planned. In fact, 46% of retirees say they left the workforce earlier than expected, according to the 2026 EBRI/Greenwald Retirement Confidence Survey.

So How Do You Ensure an Income Stream in Retirement?

First, sit down with your spouse or partner — if you have one — and your financial advisor and calculate your regular expenses, which generally include housing, food, transportation and insurance. Other expenses to consider are charitable donations, education costs, travel and gifts.



Next, you’ll want to identify the income sources you can draw from to create a monthly “paycheck.” Your list may include a severance package, a pension and retirement accounts — such as traditional or Roth 401(k) or 403(b) plan accounts, and traditional and Roth IRAs — in addition to Social Security benefits and possibly even rental income, disability benefits, or other income streams such as annuities.

Once you have a clear picture of your finances, your financial and tax advisors can help you determine an appropriate overall withdrawal strategy. This strategy will be determined based on your assets, age, income sources, tax considerations and other factors. If it looks like you’re currently spending more money than your projected monthly retirement income, then your financial advisor may suggest ways to help you adjust your finances. This may be by delaying retirement or taking on part-time consulting work, perhaps, or moving the date at which one or both of you begin claiming Social Security benefits. You might also begin to look for ways to trim expenses in one area or another.

It isn’t enough to know how much you can afford to draw from your income sources each month. You’ll need to consider the tax and investment implications of withdrawing money from each source, among other factors. Again, that’s where your advisors can help you understand your choices.



Now let us take a dive into Social Security. Though you can begin collecting Social Security at age 62, your benefits will increase each year you wait on collecting; up to age 70. “If you can afford to delay tapping your Social Security benefits, you’ll likely have greater funds available later, when you may need them most,” says Koh. Still, sometimes it might make sense to consider claiming benefits sooner. For one, doing so might allow you to delay withdrawing money from your retirement savings accounts to give them more time to grow.

Lump sum or monthly payments? Pensions and some retirement packages may offer you a choice: take a lump-sum payout or begin monthly payments immediately, or, if you retire early, delay those regular payments until the normal retirement age under the plan or later. It’s a good idea to consult your tax advisor on the implications of each option.

When it comes to withdrawals from your retirement accounts, the tax rules and implications can be complex. If, for instance, you leave your job during or after the year you turn 55, the Rule of 55 generally allows you to tap your account under your employer’s retirement plan, such as a 401(k), without owing the 10% early withdrawal tax.

From a tax perspective, in general, it’s wise to withdraw from your taxable accounts first, then tax-deferred, then tax-free. That’s because the money you take from a taxable account (such as a brokerage account) may be taxed as capital gains at a lower rate than what you’d owe on distributions from traditional 401(k) plan accounts, traditional IRAs and some other tax-deferred savings, which are taxable as ordinary income.

“Your financial advisor can help you determine the best mix of withdrawals,” says Merrill Financial Advisor Lisa Kent. “As you create your drawdown plan, you’ll want to try to avoid landing in a higher tax bracket or derailing your preferred asset allocation,” she notes, adding, “When clients convert their retirement assets into cash, we generally help transfer them someplace liquid and secure until they need them.”

After you’ve addressed your short-term income needs, it’s time to review your portfolio to see whether it has the potential to last 30 or more years. In a low interest-rate environment, “an overly conservative portfolio is unlikely to provide the growth you may need for a longer-than-expected retirement,” says Koh — especially in a high-inflation environment. So you may want to consult with your financial advisor on the appropriate asset allocation mix.

While a fixed income provides diversification and potentially offers a ballast to market volatility, “for purposes of growth, you should engage with your financial advisor to determine what the right fixed income solutions would be, given your risk appetite and tax sensitivity,” suggests Koh. For purposes of income, some alternatives include dividend-paying equities, real estate investment trusts (REITs), or other options such as Fixed Index Annuities.

Fixed Index Annuities (FIA) offer a reasonable rate of return while protecting one’s principal from market declines. Essentially, with a FIA, your principal is protected from market declines, subject to policy terms. Many FIA also offer a free 10% withdrawal each year, which can help provide an income stream with no taxable consequences. Another great feature is that some FIA's offer additional benefits that can even help cover the cost of long term care should you need it.

Diversification is vital, adds Merrill Financial Advisor Mary Jo Harper. “The biggest mistake I see among retirees is a portfolio overly concentrated in the stock of a former employer or in one sector, usually the sector the client worked in,” she explains.

At Summerlin Benefits Consulting, we recommend using the “Rule of 100” to determine how you should diversify your portfolio. The Rule of 100 suggests subtracting your age from 100 to determine a benchmark of how much of your money you should keep at risk versus putting it in safer strategies. For example, for a 70 year old, 30% of their money in a truly diversified portfolio could remain at risk, while 70% should be made safe.

It’s a good idea to review your plan with your financial advisor regularly so that you can make adjustments depending on market conditions, inflation, personal goals and other factors. That way, you can take comfort in knowing you’re managing the retirement assets you’ve saved over your career in the most thoughtful way possible.

Summerlin Benefits Consulting does this day in and day out with our clients. Our top priority is safety first; we help our client family protect their nest eggs so they can do less worrying and enjoy retirement.

Important Tax and Legal Information

This content is for informational purposes only and does not constitute tax or legal advice. Summerlin Benefits Consulting does not provide social security, specific advice related to taxes, or legal advice. Consult a tax/legal professional for guidance with your individual situation.

Important Retirement Planning Information

Every retirement strategy is unique, and not all annuity products offer the same features, guarantees, or level of protection. References in this article apply only to the specific retirement solutions discussed and should not be interpreted as applying to all annuities. The right strategy depends on your individual goals, financial situation, and retirement objectives. This is something Summerlin Benefits Consulting can help you determine.

Frequently Asked Questions

Q: How do I replace my salary when I retire?

A: Replacing your salary in retirement means building a “retirement paycheck” from multiple income sources — Social Security, pensions, 401(k) or IRA withdrawals, and other savings. A financial advisor can help you calculate expenses and design a withdrawal strategy that covers your costs without running out of money.

Q: What is the Rule of 55 and how does it work?

A: The Rule of 55 lets you withdraw from your current employer’s 401(k) penalty-free if you leave that job in or after the year you turn 55. Regular income taxes still apply. It doesn’t cover IRAs or accounts from previous employers.

Q: Should I delay claiming Social Security benefits?

A: Delaying Social Security past age 62, up to age 70, increases your monthly benefit each year you wait. If you can cover expenses from other income sources in the meantime, delaying can mean more guaranteed income later — but claiming early may let retirement savings grow longer untouched.

Q: In what order should I withdraw money from my retirement accounts?

A: Generally, withdraw from taxable accounts first, then tax-deferred accounts (like traditional 401(k)s and IRAs), then tax-free accounts last. This order can help you avoid a higher tax bracket, since taxable withdrawals are often taxed at lower capital gains rates than ordinary income.



Q: How common is it to retire earlier than planned?

A: Nearly half of retirees — 46%, according to the 2026 EBRI/Greenwald Retirement Confidence Survey — say they retired earlier than expected, often due to health issues, layoffs, or caregiving needs. Because early retirement stretches savings over more years, having an income strategy in place matters even more.