Are you saving enough now to last through your retirement? Consider these useful tips and insights on how to make smart saving and spending decisions for each phase of life regarding retirement.

Reaching your retirement savings goal is one of the most rewarding, yet complex events that most people will ever encounter. You spend most of your life working toward reaching your retirement savings goals, but there is an additional—and vital—piece of the retirement planning puzzle: figuring out how you will draw down from your savings to produce an effective retirement income plan that will last through the life of your retirement.

Retirement Income Planning

The exercise in managing savings accumulated over the course of your career, and selecting appropriate benefits, is more complicated than merely attaining a certain age or accumulating a targeted amount of money. Retirement income planning is the process of converting all of a retiree’s financial resources (savings, Social Security, pension, investments, etc.) into a systematic flow of income, which needs to last for your entire lifetime. It is important to carefully plan for retirement by understanding your needs and risks, and also considering the appropriate level of protection for your income.

The Different Phases of Retirement Planning

Don’t delay saving for your retirement, no matter how distant retirement may seem. Pre-retirement planning is essential, as pensions are disappearing, life expectancies are increasing, and the years spent in retirement are rivaling the number of years people spend working. During the retirement planning process, there are two different phases: the “Accumulation” phase (pre-retirement) and the “Distribution” phase (post-retirement).

The chart below demonstrates the shift in goals some may experience during each phase:

Investor GoalAccumulationIncome &  Capital Preservation
Investment NeedsGrowthModerate Growth & Income
Portfolio AllocationTraditional Assets (Stocks, Bonds, Cash)Traditional and Guaranteed Income Sources
Risk ToleranceHigherLower

Developing and Effective Retirement Income Strategy

Any investment involves some level of risk; however, it is very important to understand the numerous risk factors that can significantly impact your income once retirement finally arrives. On “Official Retirement Day,” you may stop working and no longer receive a steady paycheck from your employer. One of the toughest challenges for retirees is to “create” (or replace) that previous, steady income stream. This newly constructed stream of income needs to be safe and consistent, have the opportunity to grow over time, and must last through the retiree’s entire lifetime. One of the most difficult challenges is how to invest prudently for growth (during the accumulation phase), but to also provide income for life (during the distribution phase).

As the Average Life Expectancy Increases, So Does Your Retirement Income Need

Life expectancy is the most significant factor in planning for retirement, yet it is an unknown. According to the Social Security Administration, the average 65 year old male has a life expectancy of 83 (18 years), whereas a 65 year old female’s life expectancy is 85 (20 years)1. Living 20+ years in retirement, (without a steady paycheck from your employer) is an intimidating concept, but what is even more alarming is that these figures are just the averages. A significant percentage of retirees will likely live even longer. In fact, for a healthy 65-year-old couple, there’s a 50% probability that at least one partner will live beyond age 91. And a 25% chance that at least one partner will reach age 96 or older2.

Having confidence in your ability to produce a steady monthly income brings great comfort in retirement, but also takes a great deal of planning. It is important to prepare during both the accumulation phase and distribution phase in order to ensure that your assets are properly allocated to balance out your individual need for growth potential, but for income as well.

Each individual has their own vision of what amount is needed in regular cash-flow to maintain their standard of living. Some of this income will be from guaranteed sources, such as Social Security or pension income, and some other portions of an income plan may not have the same degree of regularity.

There are a variety of investment options that can be integrated into a plan, but if there is a gap between your sources of income, and the amount that will make you confident in maintaining your style of living, you may consider utilizing an annuity to create an additional source of guaranteed income.

Using Annuities to Generate Retirement Income

An annuity is a contract between a person and an insurance company, in which a client’s money is invested, and in return, the company pays out regular distributions either now, or in the future. Most often, these payments are disbursed during one’s retirement years, and typically are paid out for the life of the recipient (also known as the annuitant). An annuity is the only investment that can provide a guaranteed income for life, similar to that of a pension or Social Security check. The structure of the annuity shifts a portion of the longevity risk to the insurance company, and away from the investor. If the value of the investments within the annuity contract fall to zero, many types of annuities will continue to pay the investor as long as they are alive.

Additional Considerations About Annuities

It's important to carefully consider the risks associated with the purchase of an annuity as well.

  • Distributions are taxed as ordinary income, not capital gains. Investment growth might be tax-deferred. However, payments get added to your ordinary income. Not only does that mean the tax rate is often higher (for tax year 2022, the IRS’ top income tax rate is 37% versus 20% for capital gains)3. In addition, the payments could push you into a higher tax bracket.
  • You’ll face tax implications if you withdraw money before you reach age 59 ½. The IRS will hit you with a 10% early withdrawal penalty if you pull out principal before then. Plus the withdrawal amount will also get added to your ordinary income, with the associated risk of tipping into the next tax bracket.
  • You’ll pay to take your money out before your contract is up. The annuity issuer counts on having your principal for the term of the annuity. Their return commitment is based on being able to invest that money during that time. The penalty, called a surrender charge, discourages you from withdrawing your principal early and also helps the issuer recoup returns you received that they won’t have the chance to earn on your investment. The earlier into the contract term you withdraw principal, the higher the surrender charge will be.
  • The annuity issuer’s stability can be a risk—so pick carefully in most situations. You’ll only receive the income you’re planning for while the company remains in business to pay it.
  • Commission costs can be a consideration. Annuities are known for having higher commission charges. That’s why it’s important to work with a Financial Advisor you trust—and ask questions about why your advisor believes an annuity is right for you.
  • Annuities may not be the best option for everyone. Some investors may have sizable portfolios, or are collecting a monthly check from a defined benefit plan, pension, or Social Security. In this case, an annuity may not be a necessary component of your income plan, as you may have sufficient income sources to feel comfortable about your income in retirement.




Working With Janney

Depending on your financial needs and personal preferences, you may opt to engage in a brokerage relationship, an advisory relationship or a combination of both. Each time you open an account, we will make recommendations on which type of relationship is in your best interest based on the information you provide when you complete or update your client profile.

When you engage in an advisory relationship, you will pay an asset-based fee which encompasses, among other things, a defined investment strategy, ongoing monitoring, and performance reporting. Your Financial Advisor will serve in a fiduciary capacity for your advisory accounts. For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.

By establishing a relationship with us, we can build a tailored financial plan and make recommendations about solutions that are aligned with your best interest and unique needs, goals, and preferences.

Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals.



1. Source: SSALifeExpectancycalculator:

2. Source: American Academy of Actuaries and Society of Actuaries, May 2021

3. There are a few exceptions where capital gains may be taxed at rates greater than 20%. Visit for details.

This is for informative purposes only and in no event should be construed as a representation by us or as an offer to sell, or solicitation of an offer to buy any securities. The factual information given herein is taken from sources that we believe to be reliable, but is not guaranteed by us as to accuracy or completeness. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed within.

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About the author

Peter A. Longo

Vice President, Director of Insured Solutions Consulting

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