Retirement Readiness: How to Manage Income Needs

By Hightower Westchester on June 9, 2026

As you start to think about retirement, there are a lot of things to consider like what you are going to do to fill your time, where are you going to live, and most importantly, where is your income going to come from?

Throughout your career, you likely relied on a single job with a consistent paycheck every few weeks. That dependable income stream probably supported most, if not all, of your lifestyle. However, retirement often brings a significant shift. With fewer companies offering pensions, income isn’t as predictable. So how do you navigate this new financial reality and create reliable income in retirement?

I think it starts with understanding your needs, specifically, how much monthly income you will need to cover your expenses. The first thing we recommend is completing a financial plan. If you haven’t done that yet, there’s no time like the present.

One of the most challenging parts of the process will be figuring out where you spend your money, as this will help shape a realistic and sustainable budget. Once you figure out how much you need to maintain, or even enhance your lifestyle, the next step is to determine where the income will come from. Unlike during your working years, it will likely be coming from multiple sources rather. Here’s a simple way to break this down:

1. Pension – if you are lucky enough to have one, it can provide predictable income
2. Social Security – we generally suggest holding off as long as possible, ideally until at least your Full Retirement Age (FRA), which is between 67 -70. The longer you wait, the higher the monthly benefit, growing by roughly 8% a year in those final years.
3. IRA and retirement accounts – You can begin withdrawing from these accounts at age 59½   without incurring a 10% early withdrawal penalty. In 2026 Required Minimum Distributions (RMDs) begin at age 73 (as of 2026). So, the years in between can be thought of as optional. But keep in mind that IRA withdrawals are fully taxable as ordinary income.
4. Savings accounts and money markets – tapping into cash reserves can help cover short-term needs or supplement other income sources.
5. Investment accounts – Taxable investments can provide additional income through withdrawals, dividends, or capital gains.  
6. Part-time work or consulting – if you’re interested, earning some income in retirement can help bridge gaps, reduce the need to draw from savings, and can keep you engaged.

Ideally, some combination of the income sources listed above should provide enough money to meet your needs. A financial plan can demonstrate how it can work and how to take funds in the most tax efficient way possible.

We know that most people are hesitant to tap into their savings or investment accounts, and often think of those funds as “for the future.” But in retirement, the future is now.

One thing we discuss with clients, and we can illustrate in the financial plan, is that drawing a certain amount of money from your investment account will not deplete it. Your investments can continue to grow over time while still providing the income that you need to support your retirement lifestyle.

A common guideline we use is the 5% rule. This suggests that withdrawing up to 5% of your investment portfolio on an annual basis should allow the principal to remain intact and continue to grow.

This 5% rule comes from the endowment world, where large (or small) endowments spend without taking from the principal. Here is a simple way to look at it. If your portfolio can achieve an average annualized return of 8% over time and you withdraw 5% of that, there is an extra 3% to offset fees and inflation, potentially allowing your portfolio to continue growing and supporting increasing withdrawals over the years.

There have been many academic studies supporting this approach, and while it serves as a helpful rule of thumb, the best strategy is always personalized. A financial plan can show you how this can work for you. Please feel free to contact us for more information.

Peter Lang – Managing Director, Partner – Hightower Westchester

914-825-8631 – plang@hightoweradvisors.com