Give Yourself a Pay Raise in Retirement
The right income plan can boost your income in retirement while limiting your risk.

Because inflation erodes purchasing power, it’s painful for just about everyone. But it can be especially challenging if you’re a retiree whose budget is based on a fixed income.
Remember: Retirees can’t count on getting pay raises the way those who are still working typically can.
In retirement, you’re creating your own “paycheck” — usually from Social Security benefits; maybe a pension or two; and your savings, investment and retirement accounts. If the rate of inflation outpaces that paycheck — even if inflation grows at just 2% a year — you could be looking at a shortfall down the road. And any shortfall could affect the retirement lifestyle you have planned, or the legacy you hoped to leave behind.
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That’s a potential problem for boomers and the generations behind them, who generally have made it clear that — unlike their parents and grandparents — they don’t necessarily plan to cut back on their spending when they retire.
So, what can you do? If, like many people, you fear running out of money in retirement (due to inflation or any other cause), you can make it a goal to build a more robust income plan, one that increases your paycheck over time without putting your retirement at risk.
Here are three steps that can help get you there:
1. First, get a risk assessment.
If you’re wondering about the strength of your current plan, a risk assessment can help you analyze what you have, why you have it and what you might need to change to get where you want to be. A financial adviser can use software to stress test your portfolio and analyze how it might hold up under various scenarios — whether it’s an overheated economy with spiking prices or a major market downturn. An assessment also can determine whether your asset allocation matches your true risk tolerance, and not just a one-word label like “conservative,” “moderate” or “aggressive.”
2. Next, evaluate retirement income sources and potential opportunities.
The aim here is to have an income level that supports the retirement lifestyle you desire and also accounts for life’s what-ifs, such as the death of a spouse, a health emergency or the need for long-term care. Some questions to ask at this stage of your planning include:
- How much money will you need each month or year in retirement? The budget you’re using today will offer some answers, but your goals for the future also will be an important part of this conversation.
- What income streams can you count on to pay for that lifestyle? If you haven’t yet applied for your Social Security benefits, you’ll want to carefully consider the claiming options available and assess how they apply to your situation. The same is true if you’ll receive a pension, especially if you’re offered a lump sum payout.
- Is there a gap between the income your current plan provides and what you’ll need for a long, happy retirement? If so, how can you securely fill that gap? This may take a combination of investment strategies, including using stocks that pass through increased earnings in the form of dividends and/or fixed-index annuities with increasing income options. The right kind of life insurance could also help you stay on track with your goals.
3. Finally, assess the impact taxes can have on your future.
You may have heard the saying, “It’s not what you earn, it’s what you keep.” That’s what this step is all about. By reducing your taxable income, you can effectively increase the amount of money that’s left for you to spend or pass on to your loved ones. Some things to consider when you’re looking at current and future taxes might include:
- Would a Roth conversion make sense for you? There is no age limit for a Roth IRA conversion, but the pros and cons of this strategy may differ based on your age, your goals and if you plan to leave the money to your heirs.
- What are the benefits of a properly funded indexed universal life policy (IUL)? Using an IUL as a tax-free income stream — while keeping the death benefit in place for your heirs — can be complicated, but it’s a strategy that’s worth researching. A financial adviser who is a fiduciary should be able to walk you through the process.
- What about a charitable remainder trust? Charitable remainder trusts allow donors to continue receiving income from investments they donate to a favorite charity while also getting a tax deduction. An attorney or financial adviser can help you break down the pros and cons of the two types — a charitable remainder unitrust (CRUT) or a charitable remainder annuity trust (CRAT) — depending on your goals.
- How can you know what the future holds for tax policy and rates? You can’t. Everyone’s situation is different, and today’s tax and retirement environment is complex. Tax thresholds, deductions and credits often change, and these changes can push taxpayers into a higher tax bracket without their even realizing it. One thing we do know, though, is that the low tax rates we’re currently enjoying won’t last forever, so it’s important to prepare for what’s next.
Keep in mind that your retirement (or your spouse’s) could last two decades or more, which means the U.S. economy likely will cycle through several ups and downs. By building a plan that protects your savings, keeps your taxes as low as possible, and is built to maximize your income streams now and decades from now, you’ll be better prepared for whatever comes next.
Kim Franke-Folstad contributed to this article.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
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Geoffrey Johnson is the founder and president of Arizona-based Wealth Management Resources (www.wmrconsultants.com). He has been an investment adviser since 1987, and he is a licensed Investment Advisory Representative (IAR) and Retirement Income Certified Professional® (RICP®).
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