Retiring Soon? How to Create Sustainable Retirement Income You Won't Outlast

Your retirement countdown hits zero!   Yessssssss!  Very exciting indeed.  But suddenly, the real question shows up: what replaces your paycheck, month after month, for decades to come?   Host, Andy Keeler, walks through a practical way to answer it with Keeler and Nadler's Jake Martin.  They do it without hand-waving or generic calculators, instead using a tried-and-true three-legged stool framework: investments, Social Security, and pensions or annuities.

First, a breakdown of the investments leg: what the 4% rule actually tries to solve, why taxes can quietly shrink your spending power, and why the first few years of retirement carry outsized risk. 

Then, Andy and Jake tackle Social Security planning head-on. We address the “it won’t be there” fear, explain what funding pressure means versus benefits disappearing, and talk about why timing is a major decision with spouse and tax implications. Finally, we cover pensions and annuities as sources of guaranteed income, including the real emotional value of predictable checks plus cautions around inflation, fees, and lost flexibility.

If you’re building a retirement income plan, this conversation helps you think in systems, not just account balances. Subscribe for more practical retirement planning guidance, share this with someone near retirement, and leave a review with your biggest retirement income question.

The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations.

It is only intended to provide education about finance, tax, retirement and related planning topics. To determine which investments or strategies may be appropriate for you, consult your financial, tax or legal advisor prior to implementing. Any past performance discussed during this program is no guarantee of future results.

Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

Keeler & Nadler Family Wealth is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Keeler & Nadler Family Wealth and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Keeler & Nadler Family Wealth unless a client service agreement is in place.

Transcript

The Paycheck Stops Now What

SPEAKER_00 0:02

So the retirement countdown app on your iPhone is finally showing all zeros. That's right, it's quitting time. So, where is your retirement income going to come from now that you won't have a paycheck anymore? Welcome back to Financial Opportunities Uncovered. I'm Andy Keeler, and today we're talking about one of the most important questions in retirement. Where does the income come from once the paycheck stops? I'm joined by Jake Martin, a financial advisor who helps families think through retirement income in a practical, real-world way. Jake, great to have you back.

SPEAKER_02 0:36

Thanks, Andy. This is one of my favorite topics because retirement income planning is really about confidence and knowing not just that you have the money, but also where is it going to be coming from, how long it can last, and how flexible it is throughout retirement.

SPEAKER_00 0:50

That's exactly

The Three-Legged Income Framework

SPEAKER_00 0:51

right. So back in the day, the simplest way to help clients understand where they would get income in retirement was to use the three-legged stool analogy. Why don't we start there?

SPEAKER_02 1:00

The three-legged stool is just a simple way to think about the different sources of retirement. So if you picture a three-legged stool, the first leg is your investments. Okay. Second leg is social security. And then the third one may or may not be pensions and annuities.

SPEAKER_00 1:15

Investments would include things like the 401k, an IRA, Roth IRA, taxable brokerage account, or some combination of those.

SPEAKER_02 1:22

Right. And for a lot of people, this is actually the biggest leg of the stool, especially as we've seen pensions slowly fall away. Pensions used to be a much bigger portion of people's retirement, but now it's really the investment leg that is the biggest, the biggest one.

Investments Withdrawals Taxes And Timing

SPEAKER_00 1:38

And when it comes to investments, this is where people really start talking about that 4% rule.

SPEAKER_02 1:43

That's exactly right. So the 4% rule is just a shorthand way of thinking about how much can I withdraw from my accounts without depleting it so much that it that it won't last my entire uh retirement. So, you know, a a good rule of thumb is that if you withdraw 4% or less, your your uh accounts should last at least 30 years. And by the way, this data goes all the way back to the late 1800s. So this includes stressful periods like the Great Depression, the high inflation years of the 1970s, and all of the wars and market shocks that have happened between the late 1800s and today. So this accounts for all the crazy scenarios that you can possibly think of.

SPEAKER_00 2:24

So what makes this more complicated in the real world?

SPEAKER_02 2:28

Taxes are really a big part of it. Uh, it depends on where your money is located. So if most of your money is inside of a 401k or an IRA, all that money actually hasn't been taxed yet. So you think about if you pull 4% out, you're gonna lose about a quarter of that to taxes. So in reality, you're really only be able to spend about 3% of that. So that's why it's not just about portfolio size, it's also what account location it's in, what with with what order you're taking withdrawals from, what tax bracket you're in, all of that matters uh as we think about retirement income. And I also just really want to emphasize it's it's the first five years or so that are the absolute most critical to get this right. Um, because as you get farther through retirement, these these things become less and less important.

SPEAKER_00 3:14

Why the first few years?

SPEAKER_02 3:16

Well, it really comes down to um those first few years are important because you know if you withdraw from the portfolio while the market is falling, you just imagine the market goes down 10 or percent in the first year of retirement. You know, maybe maybe you start with a million dollar portfolio, now it's only 900,000 or 800,000, you're withdrawing from that while it's down. It takes a much bigger market recovery to overcome those withdrawals. So those early years, it's really important to protect that portfolio to make sure that it can maintain its its life um over the course of retirement.

SPEAKER_00 3:53

So, in your example, the if the market goes down 10%, plus you're taking a 4% withdrawal in the first year, um, one of the things we we didn't mention is that 4% withdrawal rate assumes that each year after the first year you get an inflation adjustment for your cost of living. But that in that first year, market's down 10%, you take take out four. So your portfolio is really down 14%.

SPEAKER_02 4:18

That's right. Exactly right. And so you need a much bigger recovery to to uh kind of make up that that loss.

SPEAKER_00 4:25

And so one of the ways that we reduce that risk is by implementing a bucket strategy. Can you help our listeners understand how that works?

SPEAKER_02 4:33

Sure. We really start with keeping a cash reserve or a short-term bucket for near-term spending needs in the first few years of retirement. So I like to think about you know, what is the cash flow you're gonna need for the first year of retirement? That money should be super safe. You know, a lot of times we just keep it in a money market fund or a super safe bond fund that's not gonna move up and down. Um, that way, if you do get that scenario where markets are down a lot in the first few years of retirement, at least we've got some money that has not taken that kind of hit that we're withdrawing from.

SPEAKER_00 5:05

That makes sense. People often focus on do I have enough? But maybe the bigger question is what happens if the market starts badly right when I retire.

SPEAKER_02 5:13

Exactly right. So two people could retire at different times with the same starting portfolio and have very different outcomes depending on what the market's doing. And so you we obviously don't know what the markets are going to do in the future. So the way we hedge that is by you making sure your near-term cash flow is is covered, and then we allow the kind of middle, uh, middle portion of your portfolio to move up and down a little bit. And then the longer-term money can can really grow for long-term spending.

SPEAKER_00 5:41

So let's let's drill down in into this concept. It's fairly common for the lay person to maybe look at their investments over the past 10 or 15 years. Let's say that those investments have averaged 8%. Um, it's very common for folks to have this perception that, well, if I've averaged 8% per year, I could take out 8% per year and never run out of money. Trouble with that logic is that that 8% is an average rate of return over that 10 to 15 years or even 30 years, let's say. Um, but the returns come in a random sequence, as you've mentioned earlier. You could have two people that have the same portfolio value to start, let's say it's a million dollars, but one of them retires in a really good period where right out of the gate, the market, it's a bull market, market's up 15% on average per year for the first 15 years. And that's really what we've been looking at the last 17 years, about a 15% average return. Then at the end of their life, when they're in their 90s, maybe they realize really bad returns where the market's down 15, 20, 30 percent in a given year. But there's hardly any money left at that point to lose the 20 to 30 percent. You take someone else and you flip that sequence the opposite way, and they think they can take out 8%, but the market goes down 20%. They decide to take out their 8% anyway. They're taking out 28% or their portfolio drops 20, 28%. That's a $280,000 reduction in their nest egg. Right. Now going into year two, maybe they have a decent year. It's up five or ten percent, but there's two hundred and eighty thousand dollars to recover from that. So I think you know, um, this 4% withdrawal rate accounts for those, this, that sequence of return risk. And I would say that 4% is a starting point. Um, there have been a number of academics that have have looked at that recently and said, well, maybe that's a little low. Clearly it depends on someone's willingness to take risk, their asset allocation. I think that uh Bill Bangin, the gentleman that that um created the 4% safe withdrawal rate, want to say he used a 60-40 mix or something like that. That's right. 60 percent stocks, 40 percent bonds. If someone's willing to do 70 percent stocks, 30 percent bonds, perhaps their withdrawal rate might be a little higher. You got it.

SPEAKER_02 8:17

And and to your point, if you retire into boom years, you know, that first decade or two of markets do really well, a safe withdrawal rate can actually jump up to six to eight percent easily, no, no problem. Uh that four percent roll is is just trying to account for all those really bad periods. Yeah, how do we make sure that even if you hit a bad period, you're still okay?

SPEAKER_00 8:37

Right on. So the first leg of the stool is really about growth, withdrawals, taxes, and timing.

SPEAKER_02 8:42

That's a really good way to put it. And it's really the most flexible leg, but it's also the one that needs the most attention.

SPEAKER_00 8:48

And I know this question may seem elementary to some, but to answer the fundamental question of where the income from investments will come from in retirement, a connection is made between your investment accounts and your bank account. And wherever we land on that monthly amount, we simply send it to your bank account. It's as simple as that.

SPEAKER_02 9:04

You got it. It just lands in your checking account just like a just like a paycheck would.

SPEAKER_00 9:08

So let's

Social Security Myths Funding And Claiming

SPEAKER_00 9:09

move on to the second leg, Social Security. A lot of people are anxious about it. And I hear the same phrase over and over, it won't be there when I need it.

SPEAKER_02 9:17

I'm really glad you're bringing it up. And this is a myth that I want to address right away. Uh, first of all, I I just believe in the in my deep in my heart that Social Security is not going away. Uh it is facing long-term funding pressure. So there's a reason that people are hearing about this, but it's very different from disappearing. So uh in fact, actually, just recently in early 2025, there was an act that that went through that repealed um some of the some unpopular provisions called the windfall elimination provision and the government pension offset. Uh, these were things that that offset Social Security benefits if you had a public pension. So that went away. So if if you're a police officer or a firefighter or a teacher, someone who has a public pension, your social security benefit has actually just gone up as a result of this recent act that went through.

SPEAKER_00 10:08

You know, when people question whether Social Security will be around, what do you think would happen if they pulled the plug on Social Security and every American that had paid in for 35 years was said, you know what, we're not giving your money back. As a financial advisor, uh, what would happen to me if somebody gave me a million dollars and 10 years later I said, you know what, you're not gonna get it. Exactly. It's gonna be a riot in the streets, porches and pitchforks. It ain't happening, folks. We'll figure it out.

SPEAKER_02 10:39

You know, almost 50% of retirees, that is their only source of retirement income. So I mean, if that goes away, uh you're exactly right, Andy. I mean I think I think it would be an absolute political firestorm. So I just don't see it going away.

SPEAKER_00 10:53

So what about the funding story with respect to Social Security? Because that's still what we hear in the news.

SPEAKER_02 10:59

Right. So the key thing is that running out of money is not the same thing as going away. So uh there's a big fund, a big pot of money that is dwindling down because there's more withdrawals coming out of it than are going in. Um and the Congressional Budget Office projects that that will run out around 2032 if Congress makes no changes to it. However, there will still be people who are currently working and still paying into the system. So even if that trust fund goes to zero, which I don't think it will, but even if it did, you know, the Social Security would still be able to cover 75 to 80 percent of the promised benefits um that people are expecting. So again, you know, even in this Armageddon scenario, it's still going to provide most of the benefit that that uh people are expecting. Now, um, I do want to note that this is not the first time Social Security has faced a funding crisis. Actually, back in the early 80s, the trust fund was only a few months away from being unable to pay benefits. And as a result, uh, in 1983, Congress passed a big bill to overhaul Social Security. That's when the full retirement age moved from 65 up to 67. They also increased payroll taxes and they made Social Security benefits taxable. So clearly some changes had to be made. But as a result, you know, suddenly the whole system was solvent again for several more decades. So I think we could easily see some tweaks to it like that. Yeah. Um, but I don't think it's gonna go away.

SPEAKER_00 12:29

There are a lot of toggles that can be pulled and shouldn't be outside the realm of possibilities for them to change the early retirement age from 62 to say 65, move the full retirement age to 70, and then change the age 70 maximum benefit age to like 73 or something like that, changing the cost of living adjustment or eliminating it. Pension funds, most uh private pension funds for like um corporate America, they don't have a cost of living adjustment. Whatever you take at 65 is that monthly benefit you're gonna get for the rest of your life. Um, Social Security is unique in that they offer that cost of living adjustment. Some um state pension funds, municipal pension funds, they still offer some cost of living adjustments, but they've changed those dramatically. Some of them don't give you an increase for five years and then start giving you maybe a 2% increase.

SPEAKER_02 13:24

Right. So, I mean, the clearly there are some changes that need to be made. The system as it's working now is not functioning well. Um, but but I don't think it's gonna go away. I think we're gonna see some tweaks like we did back in the 80s.

SPEAKER_00 13:36

So then there's this timing decision. When do I take it?

SPEAKER_02 13:39

Yeah, when to claim is a major decision. Andy, we could do a whole episode just on this one topic. Um so I'm just gonna take it very high level. But it just uh to be really clear, you the earlier you start it, you you create income sooner, uh, but you you take a smaller benefit in order to do that. If you delay, you get a larger increase, but obviously you have to wait longer to get it. So um and by the way, this uh decision affects not just the retiree, but also their spouse if they're married. So there's a lot of moving parts to this decision. I highly recommend talking to one of our KN advisors about this if you're if you're approaching this decision. Um, because you want to make sure you're taking everything into account uh when you make that social security decision.

SPEAKER_00 14:22

So in an earlier episode, we talked about this AI financial planning tool that offered an AI financial plan for free with no cost, no obligation, with the option to speak with a real advisor if you had questions. That AI tool didn't mention Social Security timing at all. And that's a huge critical decision.

SPEAKER_02 14:43

Aaron Powell It is. Yeah, it's got lots of tax ramifications, a lot of income ramifications. You don't want to take that decision lightly.

SPEAKER_00 14:49

Aaron Powell So the big takeaway with Social Security is don't panic, don't ignore it, and don't base your plan on myths. Exactly right, Andy.

Pensions And Annuities Stability Tradeoffs

SPEAKER_00 14:57

So let's talk about the third leg, pensions and annuities. This one can be controversial because people tend to have strong opinions about annuities in particular.

SPEAKER_02 15:05

They do. And at a basic level, this leg is really about fixed income and it's about turning over some part of your retirement into a predictable check that arrives no matter what the market does. And you know, a lot of people like having that guaranteed income. You essentially what you're doing is you're just paying an insurance company to assume the market risk that you would otherwise do with your own dollars. And in return, they provide a guaranteed stream of income. So for retirees, this can actually create a really powerful psychological benefit because you don't have to worry, you know, is the market up? Is the market down? I just know that my X number of dollars is going to show up in my account every single month. So that that a lot a lot of times takes a lot of the anxiety out of retirement income.

SPEAKER_00 15:49

Great.

SPEAKER_02 15:49

Um, just as an example, I have a couple I work with who retired from the Columbus Zoo, you know, wonderful institution here in town, and they have a great pension program. And their pensions cover about 70% of all of their retirement income needs, which is just creates incredible stability for their retirement. I mean, obviously, I want their accounts to do well, but when I know that 70% of their income is already covered, I don't worry so much about what markets are doing day to day.

SPEAKER_00 16:17

The emotional value matters. It's not just about the math. Absolutely.

SPEAKER_02 16:21

I I've seen some retirement, some retirees become much more comfortable spending once they know that those essential expenses are covered, especially by a pension and social security. Um, and so that sense of freedom is really worth a lot.

SPEAKER_00 16:34

But there are downsides too.

SPEAKER_02 16:36

Definitely. You know, one of the big ones, and you touched on this earlier, Andy, is inflation. So if you've got a fixed payment, and if there's no cost of living adjustment, if it doesn't go up over time, if we hit a high uh period of inflation like we've seen recently, you know, that that payment can start to buy less and less over time. So it may be a great benefit when you retire right at 65, but as you get that 75 and 85 and later, you know, that that same payment doesn't buy buy as much as it used to. So um you know the big issue with an annuity or a pension is is what happens with inflation. Um and then the other thing is that these products oftentimes come with high fees and surrender periods, some restrictions. Um, and so you know, as you compare all those things, uh you have to be careful not to give up too much flexibility for the guarantee that you're that you're buying.

SPEAKER_00 17:25

One of the things uh you mentioned this this couple that retired from the zoo. Um if that's a I think that's a municipal pension or state pension fund. So they do have a cost of living adjustment, but let's just say that that was Ford Motor Company or GM that they retired from. Right. They get that 70% right out of the gate and they're like, geez, we don't have to even have to spend our investments. We're gonna leave our investments to our kids, we're gonna start gifting, whatever. However, as I said, typically private industry pensions don't have a cost of living adjustment. So each year that that passes, that 70% is gonna buy them less and less and less, which makes them lean more on their investments thereafter. Um, so you need to be really careful before you start giving too much money away.

SPEAKER_02 18:11

Exactly.

SPEAKER_00 18:12

Certainly that predictability of stable income is important, but not all fixed income is equal.

SPEAKER_02 18:18

Right. You know, a pension is different from an annuity, a social security benefit is different from an insurance product. And even with annuities, there's lots of different structures and costs. So you it's important to really dig into this before you commit to any one particular thing. But the real question is whether a retiree needs more guaranteed income or whether or whether that income meaningfully improves their ability to spend, sleep at night, and stay on plan. If it does, then then these things can be really valuable. If it costs too much flexibility or growth, then it may not be a good fit.

SPEAKER_00 18:50

That makes sense. So in your mind, the third leg is really about stability, but with a caution label.

SPEAKER_02 18:55

That's a good way to put it. Stability is great, but retirees also need to preserve purchasing power and avoid overpaying for those guarantees.

Build A Durable Income System

SPEAKER_00 19:03

So when you put all these three legs together, the big picture is really about balance.

SPEAKER_02 19:07

Right. Investments provide growth and flexibility, social security provides that foundational inflation-adjusted income, and then pensions and annuities can provide certainty and peace of mind. So the right mix really depends on each retiree. Almost nobody has a retirement plan that relies on just one. Usually a strong plan blends two or three.

SPEAKER_00 19:28

And the order matters too, right?

SPEAKER_02 19:30

Definitely. We don't just ask what do you have? We ask how dependable is it? How is it taxed? How exposed is it to inflation or market risk, and how much flexibility do you need? Um so that's where retirement income planning becomes more than just an account balance. It's really about a whole system.

SPEAKER_00 19:50

Jake, this has been really helpful. I think a lot of people hear retirement income and assume it's just about savings. In fact, most very basic retirement planning tools consider savings alone. For example, many 401k websites will project an estimated income in retirement, but often this amount excludes Social Security and pensions and most certainly excludes other investments outside the 401k, but clearly there's more to it.

SPEAKER_02 20:12

There really is. The better question is not how much do I have, it's where is my income coming from and how durable is it?

SPEAKER_00 20:20

Durable, I like that word. And if someone listening wants to look at their own three-legged stool.

SPEAKER_02 20:25

The best next step is to book a meeting with a CAN advisor and map it out. Uh, look at your investments, your social security strategy, and any pension or annuity income you have side by side. Once you see the whole picture, it becomes a lot easier to make smart decisions about retirement.

SPEAKER_00 20:41

That's a great place to end. Jake Martin, thanks for joining us. And as always, we thank our faithful listeners. I'm Andy Keeler, and this is Financial Opportunities Uncovered, brought to you by KN Family Wealth. If you have questions on anything you heard in this episode or have an idea for a future episode, reach out to me on LinkedIn or email me at andy.keeler at knwealth.com.

SPEAKER_01 21:08

The opinions expressed in this program are for general information purposes only and are not intended to provide specific advice or recommendations. It is only intended to provide education about finance, tax, retirement, and related planning topics. To determine which investment strategies are appropriate for you, consult your finance, tax, or legal advisor prior to implementing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always, please remember investing involves risk and possible loss of principal. Please seek advice from a licensed professional. Keeler and Adler Family Wealth is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Keeler and Adler Family Wealth and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Keeler and Adler Family Wealth unless a client service agreement is in place.