Retirement income is not one decision. It is a series of connected choices about Social Security, withdrawals, taxes, healthcare and long-term care, and each affects the others.

In our process, we approach income planning in three layers: a reliable income floor for essential expenses, insurance against large and unpredictable costs, and an invested portfolio designed to help keep pace with inflation over a long retirement. Below are the topics we review with families, using 2026 rules.

1. Map your spending before anything else

Every income decision starts with a realistic budget, split into two groups:

• Essential expenses. Housing, food, utilities, insurance premiums, taxes and healthcare. These need covering even in a bad market year.
• Discretionary expenses. Travel, gifts, hobbies and large one-time purchases. These can flex if markets or circumstances change.

Spending also shifts over time: often more travel early, more healthcare later. A flat 30-year assumption can mislead.

2. Decide when to claim Social Security

You can claim retirement benefits as early as 62 or as late as 70. For anyone born in 1960 or later, full retirement age is 67. Claiming at 62 permanently reduces the monthly benefit by about 30%, while each year you wait past full retirement age adds delayed retirement credits of roughly 8% per year until age 70.

Delaying is not automatically right. It makes more sense if you are in good health, have other assets to live on in the meantime, or are the higher earner in a married couple, because the larger benefit typically continues as the survivor benefit. Claiming earlier may make sense if health is a concern or savings are limited.

One important change for public-sector retirees: the Social Security Fairness Act, signed in January 2025, repealed the Windfall Elimination Provision and the Government Pension Offset. If those rules reduced your benefits, your numbers may now look different. Federal employees should revisit their FERS and Social Security coordination; our federal employee retirement planning page covers this in more detail.

3. Evaluate pension and annuity options

If you have a pension, the choice between a single-life payment and a joint-and-survivor option is usually irreversible. A single-life option pays more each month but stops at your death; a survivor option pays less but continues for a spouse. A lump sum, if offered, gives control but shifts investment and longevity risk to you.

Some retirees without a pension consider an income annuity or a fixed indexed annuity to build a similar income floor. These products can help reduce the risk of outliving savings, but they come with trade-offs: fees and rider costs, surrender charges that limit access to your money for years, caps or participation rates that limit upside on indexed products, and guarantees that depend on the claims-paying ability of the issuing insurer.

4. Set a tax-aware withdrawal order

Most retirees hold money in three types of accounts, and each is taxed differently:

• Taxable accounts (brokerage accounts): gains are typically taxed at capital gains rates, and only on the growth.
• Tax-deferred accounts (traditional IRA, 401(k), TSP): every dollar withdrawn is taxed as ordinary income.
• Roth accounts: qualified withdrawals are tax-free.

The rule of thumb is taxable first, tax-deferred next, Roth last. A blended approach often works better: drawing some tax-deferred money each year to “fill” lower brackets rather than letting large balances be forced out later at higher rates. The right mix depends on your brackets, heirs and Medicare premiums, which is where tax planning coordination earns its keep.

5. Know your RMD age and plan around it

Required minimum distributions (RMDs) are the annual withdrawals the IRS requires from tax-deferred accounts. RMDs begin at 73 for people born from 1951 through 1959, and at 75 for those born in 1960 or later. Your first RMD can be delayed until April 1 of the following year, but that means taking two distributions in one tax year.

Missing an RMD triggers a 25% excise tax on the shortfall, reduced to 10% if corrected in time. Roth 401(k) and Roth 403(b) accounts no longer require RMDs during the owner’s lifetime, matching Roth IRAs.

6. Use low-income years for Roth conversions

The years between retiring and starting RMDs or Social Security are often the lowest-income years of your adult life. Converting part of a traditional IRA to a Roth during this window means paying tax now, ideally at a lower rate, in exchange for tax-free growth and withdrawals later and smaller future RMDs.

The downsides are real. You pay the tax up front, ideally from non-retirement funds. The added income can push you into a higher bracket, raise Medicare premiums two years later, or reduce other deductions. For example, the new $6,000 senior deduction for those 65 and older (available for 2025 through 2028) begins phasing out above $75,000 of modified adjusted gross income for single filers and $150,000 for joint filers.

The best withdrawal strategy is rarely the one that minimizes this year’s tax bill. It is the one that manages taxes across the whole retirement.

7. Budget for healthcare, Medicare and IRMAA

Medicare eligibility starts at 65. If you retire earlier, you will need to bridge coverage through COBRA, a spouse’s plan, retiree coverage or the marketplace. Once on Medicare, you will choose between Original Medicare with a Medigap supplement and a Part D drug plan, or a Medicare Advantage plan.

In 2026, the standard Part B premium is $202.90 per month and the Part B deductible is $283. Higher earners also pay IRMAA, the Income-Related Monthly Adjustment Amount, a surcharge on Part B and Part D premiums. It is based on income from two years earlier: 2026 premiums use your 2024 tax return, with surcharges starting above $109,000 for single filers and $218,000 for joint filers. A large Roth conversion or property sale can therefore raise premiums two years later. If your income dropped because you retired, you can ask Social Security to reconsider using Form SSA-44.

8. Plan for inflation and a long retirement

A couple retiring at 65 should plan for at least one of them living into their 90s. Over that span, even moderate inflation can significantly erode purchasing power, so most income plans keep a meaningful portion in growth assets.

Growth comes with volatility, and the timing matters. Poor returns in the first few years of withdrawals (known as sequence-of-returns risk) can do lasting damage. Some retirees hold one to three years of planned withdrawals in cash or short-term bonds so they are less likely to sell stocks during a downturn. The trade-off is that cash may lag inflation.

9. Address long-term care

Extended care, at home or in a facility, is one of the largest costs that can derail a plan. Common approaches:

Self-funding from savings or home equity avoids premiums but concentrates the risk on your portfolio.

10. Coordinate with your estate plan

Income planning and estate planning overlap more than most people expect. Check that beneficiary designations on IRAs, 401(k)s and life insurance match your wishes, since they generally override your will. Most non-spouse heirs must empty inherited IRAs within 10 years, so leaving large tax-deferred balances can create a significant tax bill for children in their peak earning years. Roth assets are often a more tax-efficient legacy.

Your retirement income checklist

Frequently asked questions

When should I start retirement income planning?

Ideally five to ten years before you stop working, leaving time to adjust savings and plan conversions.

Do Roth conversions make sense for everyone?

Not always. They tend to help most when your current tax rate is lower than your expected future rate. If you need the converted money soon, or the added income triggers IRMAA or other phase-outs, the math can work against you.

What is the biggest mistake retirees make with income planning?

Treating each decision in isolation. Claiming age, withdrawal order, conversions and Medicare premiums all interact, so they are best planned together. Learn more on our Пенсионное планирование page.