Retirement is full of promise: the freedom to spend your time how you want, travel when it suits you, invest in family, hobbies, or maybe even that long-delayed sabbatical of the soul. But the absence of a regular paycheck can also leave even the most seasoned professionals wondering: how do I make this work?
For families and couples who’ve spent decades building wealth, the challenge isn’t necessarily about having enough. Rather it’s about structuring that wealth in a way that supports your lifestyle, reduces stress, and adapts as life changes. That’s where thoughtful income and cash flow planning comes in.
Retirement Isn’t One Long Weekend
It’s tempting to think of retirement as a static phase, but in reality, it’s comprised of chapters. Your spending, priorities, and even your income sources will likely shift over time.
For example, in early retirement, you might spend more on things like traveling, home upgrades, or celebrating milestones. Later on, your expenses may slow down, but medical costs and caregiving considerations are more likely to rise. According to Fidelity’s 2024 Retiree Health Care Cost Estimate, a 65-year-old retiring can expect to spend an average of $165,000 on medical expenses throughout retirement—a five percent increase over last year’s estimate. That figure doesn’t even include long-term care.
Knowing all of this, your cash flow strategy shouldn’t be rigid. It should adapt with you and reflect your current circumstances. The goal isn’t to create a “retirement budget” that scolds you every time you enjoy yourself. The goal is to know, with complete confidence, that the way you’re spending matches with what your wealth can support.
Where Your Income Will Come From
The first step in building a strong cash flow plan is understanding the architecture of your income. That may include:
- Fixed income sources: Social Security and pensions often provide a base layer of reliable income. They’re predictable, but not always sufficient for a comfortable retirement lifestyle. Social Security, for example, is designed to replace only about 40 percent of an average worker’s pre-retirement income. While pensions are often not adjusted for inflation, which erodes their purchasing power over time.
- Investment accounts: Your portfolio can play a key role in filling the gap between what you need and what your fixed sources cover. But drawing from your nest egg isn’t as simple as flipping a switch. Tax consequences, market volatility, and withdrawal sequencing all matter.
- Real estate or business income: If you have rental properties or ownership stakes, these can add valuable diversification to your income stream, but they can also come with risk or complexity.
The trick is to design a withdrawal plan that supports your lifestyle while minimizing unnecessary taxes and preserving long-term flexibility. A skilled advisor can help you evaluate whether it makes sense to draw from taxable accounts first, tap IRAs or Roths later, or adjust depending on market performance and life changes.
Spending With Intention
Retirement spending often falls into three broad categories: essential expenses, discretionary lifestyle spending, and one-off or surprise costs. All three deserve a place in your plan.
Yes, you’ll need to cover groceries and housing. But what about the things that make retirement feel like retirement? Travel, hobbies, charitable giving, helping your kids or grandkids—these aren’t luxuries to ignore in planning. They’re central to the life you’ve worked hard to afford.
And then there are the curveballs like a roof that needs replacing or a family emergency. Your plan needs to accommodate those too, without derailing your long-term goals.
That’s why we encourage clients to think of their plan not as a static budget, but as a dynamic flow that anticipates movement and makes room for both the expected and the unforeseen.
Why This Matters More Than Ever
You’ve likely already passed some major financial tests, including saving diligently, weathering market swings, and making investment decisions. But the distribution phase (spending down your portfolio assets) is a whole other ballgame.
The stakes are high. Over-withdrawing in the early years can jeopardize your future. Ignoring tax planning can shrink your net income. Failing to adjust for inflation or rising healthcare costs can catch you off guard.
But the good news? With thoughtful planning, you can create a structure that gives you both freedom and peace of mind. It’s not about sacrificing joy for the sake of prudence. It’s about being able to spend confidently, knowing the foundation is sound.
Final Thoughts
Retirement spending really comes down to thoughtful cash flow planning. It’s about feeling confident in the decisions you make today and knowing they support the life you want for years to come.
At WealthCrossing, we help retirees structure their income, evaluate their spending, and align their wealth with what matters most to them. If you’re looking for a plan that keeps pace with your life, we’re here to help you build it. Schedule a conversation with our team.
