Make Your Money Last Through Retirement

Create a stream of income that will see you through retirement.

(Image credit: Nicolas Hansen)

You've spent much of your career socking away part of each paycheck in your retirement accounts, carefully choosing your investments and faithfully sticking with your plan. Retirement is near -- or perhaps you've recently retired. Now comes the complicated part. How do you make sure your savings will see you through your retirement? And another big question looms: How do you protect your nest egg during a bear market -- which will inevitably come roaring back at some point?

To help answer those questions, we take a look at three key decisions for new retirees: how much you can safely withdraw from savings each year, how to protect against having to sell investments in a down market, and how to supplement Social Security to lock in guaranteed income for life.

Part 1: Set Your Strategy

How do you tap a nest egg without depleting it too soon? The math is tricky because you don't know how long you'll need the money or whether you'll be hit with big medical or long-term-care bills. And no one can be certain that the stock and bond markets will deliver predictable returns over the next three or four decades.

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Read on for more tips on how to navigate making withdrawals.

Part 2: Create a Bucket List

The 4% rule and its corollaries help ensure that your money will last through a 30-year retirement. The bucket system is extra insurance to help make sure you have enough until you kick the bucket.

Most people know that investing at regular intervals means you buy more shares when the market is low and fewer when the market is high. In retirement, you're making systematic withdrawals, which is the evil twin of dollar-cost averaging: You're selling more shares when the market is low and fewer when it's high. Each withdrawal exacerbates the decline when a fund falls in value and reduces the gains when the fund rises. In a severe bear market, pulling money from a tumbling fund can be catastrophic.

Read on to learn more about how to implement the bucket system.

Part 3: Guarantee Income

Those who don't have a traditional pension -- and that includes most of us -- are frequently envious of those who do. What could be better than a guaranteed paycheck that lasts as long as you live and is unaffected by the vicissitudes of the stock market?

There's another way: Create your own pension with an immediate annuity. Unlike the complex (and usually high-cost) indexed annuities that are sold at free lunches and dinners, immediate annuities (sometimes known as single premium immediate annuities, or SPIAs) are straightforward: You give an insurance company a lump sum and, in return, receive a monthly check, usually for life.

Read on to learn more about how to create an immediate annuity.

TAKE OUR QUIZ: Put Your Retirement IQ to the Test

Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.