Harvest The Fruits Of Your Savings

How to live well without running out of money.

- Eileen Ambrose And Sandra Block

As you near retirement, you might look back and think that saving for this next stage of life was the easy part. During your working years, the big decisions were how much to save and where to invest. But now it’s time to switch gears. Instead of accumulating assets, you must figure out how to turn your nest egg into an income stream to last a lifetime.

“The idea of withdrawing from their retirement portfolio is really painful for a lot of people. They’re savers,” says John Bohnsack, a certified financial planner in College Station, Texas.

Here are steps that can help you generate the retirement income you will need. Along the way, you’ll need to answer some questions: Will you get a part-time job in retirement that brings in some income? When should you claim Social Security or start taking your pension, if you have one? And how will you address the big uncertainties of health care and long-term care? Taxes will get more complicated because, unlike previous generations, most retirees today have the bulk of their retirement money tied up in tax-deferred 401(k)s and traditional IRAs. How do you withdraw from these accounts safely without triggering a big tax bill?

BEGIN WITH A BUDGET

Get a handle on what your annual expenses will be in retirement by creating a retirement budget. Frank Castello, a 66-year-old former IT manager from Bowie, Md., gave his retirement budget a test run before leaving the workforce in 2016. He drew up a spreadsheet with his anticipated expenses, calculating that he would need $4,000 a month to live on. He lived on that budget for two years before retiring, while also maxing out his 401(k) and boosting his savings outside the plan. “I was constantly refiguring, rejiggering, verifying and validating the numbers,” says Castello. “Do I have it right? Will I have enough? You don’t know for sure until you live it.”