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While working, there is something we call payday, it may happen once a month, more likely two or four times a month. Generally that means money is deposited into our bank account – a steady income stream we count on to pay a new set of bills.
Then we retire and everything changes, no more payday. To me recreating that is the key to a less stressful retirement. I can say that because I am fortunate to be able to do so and know the feeling of a retirement payday.
On the first of the month my pension arrives as does Connie’s tiny ($400) vested pension from fifty years ago. On the 2nd and 4th Wednesdays Social Security is added.
Something else happens too. On the first of the month interest from our bond funds and money market accounts is credited to our investment accounts. Dividends are quarterly. It all stays there for now, but can add to our income stream in the future.
I know from years on HD that retirees have different approaches to creating income in retirement, some take a percentage withdrawal, others cash amounts based on a budget, many seem to reject an annuity purchase to create an income stream.
Some retirees have pensions. Virtually everyone has SS, but many delay that income for years after retiring.
One thing is clear, all retired people need steady income, but creating it is often a challenge, sometimes requiring careful planning and decision making, sometimes rather complicated-at least from my perspective.
I favor simple, steady, all on automatic pilot, a retirement payday little different from working years, but that’s easier said than done.
What have you done or plan to do to create your payday allowing you to sleep soundly at night (or during the afternoon nap if you’re already retired😁)?
In a few months, we should have several diverse streams:
1) Pension
2) My SS (approved)
3) Wife’s SS spousal benefit (still in limbo)
4) Part time earned income (less than $24,800 a year)
5) Modest 401(k) withdrawal (around 1.5% of balance)
6) Interest/income in taxable accounts (no stocks)
Time for my nap.
Very helpful and practical. Quick question – where are you storing this money? I assume SSI and pensions are paid to a bank account, and the interest/dividends are in brokerage accts. Do you combine them into one account for the full “feel” of a paycheck? And then pay bills from that account?
My paycheck issues are sort of the opposite. I recently left public service and launched a private mediation practice. Pension starts in five years, SSI in 7-10 years. So, when I get paid from the new business, I have to break that check into: estimated taxes; replenish cash reserve and pay bills; contribute to SEP IRA; and invest any remainder. Same monthly discipline as RDQ, but still on the earnings track.
I think this was a good post, Dick. I was working on similar before we retired. I knew we would both have SS. We also had a 401k to draw from. The last 10 years before retirement we worked on Roth accounts b/c we were in the income bracket to be able to contribute to them. We started maxing them out after we paid off our house. The 401k was pretax, so we wanted to diversify. We also maxed/invested our HSA and paid our medical bills so we would have another pot to use in retirement.
The final piece was what to do with the (small) pensions. We had the 100% joint and survivor benefit available to us. The combined amount was enough to pay our property taxes, which is one of our biggest expenses, so we decided to take them instead of rolling them over into an IRA.
So in the end we have 5 regular sources of income: 2x SS, 2 small pensions, and a quarterly distribution from a tIRA. We also have the HSA for medical expenses and the Roths are also available if we need them. The SS and pensions cover our regular expenses. The quarterly distribution for tIRA is for fun and any large expenses. Right now I am saving for a car. Chris
PS. I hope this will help someone who is where I was, it was so much work to figure out.
I have a two part pension, most is qualified, but the rest is not and legally deferred compensation but still an annuity. We selected a 50% survivor annuity on the regular pension and 75% J&S on the other.
I saw too many cases in my job where a new widow was shocked to learn she no longer had any pension income.
That happened to my grandma, but my mom gets 50% of Dad’s. Both were what were available to them at the time. C