Written by Saving for retirement is a big accomplishment—but it’s only half the battle. The real challenge is turning that savings into income that lasts for the rest of your life.
Hi, I’m Dre Griggs with Obsidian Wisdom. I help people within five years of retirement build a plan that covers income, healthcare, and lifestyle—without the fear of running out of money.
Today, we’re walking through how to take your hard-earned retirement savings and turn it into reliable income you can use for the rest of your life.
Step 1: Pick Your Withdrawal Strategy
Let’s start by figuring out how you’ll take money out of your accounts. There are a few common withdrawal strategies—each with pros and cons. I’ll walk you through five of them.
1. The 4% Rule
This is where most people begin:
- Withdraw 4% of your total portfolio in year one.
- Every year after, increase that withdrawal by inflation (about 3%).
Example: If you have $100,000 saved, you take out $4,000 the first year. Next year, you’d take out $4,120.
Pros: Simple to follow. Keeps up with inflation.
Cons: If your portfolio doesn’t earn 4%, you’ll start dipping into your principal, which increases your risk of running out of money over time.
2. Fixed-Dollar Withdrawals
With this strategy, you withdraw the same amount each year.
Example: You take out $4,000 every year, no matter what the market does.
Pros: Super simple and predictable.
Cons: Doesn’t adjust for inflation. So over time, your $4,000 buys less. Think of how the Dollar Tree is now $1.25 or how car payments went from $300 to $700+ a month. That’s inflation in real life.
3. Fixed-Percentage Withdrawals
This strategy is like the 4% rule but without adjusting for inflation.
Example: You take out 4% of your portfolio each year. If your portfolio goes up, your withdrawal amount increases. If it goes down, your withdrawal shrinks.
Pros: You’re less likely to run out of money since you’re not overspending during downturns.
Cons: Your income changes every year. That unpredictability can make budgeting tough.
You can also tweak the percentage. Maybe you want to take 6% if you’re aggressive, or 3% if you’re conservative. It’s flexible.
4. Variable Percentage Withdrawals (Guardrails)
This is one of my favorite strategies. You start with a base percentage—say 4%—but give yourself room to adjust within guardrails.
Example:
- Good year? Maybe you take 6–8%.
- Bad year? You scale back to 3%.
If the market drops 10%, it’s like you lost 10%—even if you didn’t withdraw. So taking another 4% that year is like withdrawing 14%. That’s why guardrails help protect your plan. You pull less in bad years and more in good years—but only within set limits.
This helps manage your lifestyle and reduces the risk of running out of money.
5. The 3-Bucket Strategy
This is the strategy I use most often with my clients. It gives you structure, stability, and growth.
Here’s how it works:
- Bucket 1: Safe
- 1–2 years of expenses in cash, money markets, or CDs.
- Bucket 2: Income
- 3–7 years of moderate investments like bonds, annuities, and dividend-paying stocks.
- Bucket 3: Growth
- Long-term investments like real estate, stocks, business ownership, or even crypto.
You spend from Bucket 1. Bucket 2 refills it. And your growth bucket refills Bucket 2—once it’s had 10+ years to ride out market ups and downs.
This strategy helps you avoid selling during a recession and gives your money time to recover.
Step 2: Build an Investment Plan That Works for You
Your investments need to:
- Diversify your risk.
- Be allocated properly for your risk level and timeline.
- Beat inflation, so your money keeps its value.
The 3-bucket strategy helps you check all three boxes.
Plus, 65% of self-made millionaires have three or more streams of income. The IRS recognizes seven:
- Earned Income
- Dividends (Investment Income)
- Business Profits
- Royalties
- Capital Gains
- Rental Income
- Interest Income
So if you’re aiming for a comfortable retirement, shoot for at least three income streams across different asset classes:
- Real estate
- The stock market
- A personal business
These give you flexibility, growth, and stability.
Step 3: Add in Other Income Sources
Your retirement plan should also consider:
Social Security
You can start as early as 62 or wait until 70. Every year you delay after full retirement age increases your benefit by about 8%.
Many couples use this strategy:
- Lower-earning spouse takes benefits early.
- Higher earner waits until 70.
This can maximize survivor benefits later.
Pensions
If you have a pension, you’ll likely choose between:
- Life Only: Highest payout, but ends at death.
- Period Certain: Guaranteed for 10–20 years.
- Joint Life: Covers you and a spouse, but pays less.
Some folks pair “Life Only” with permanent life insurance to protect their spouse. It’s a strategy worth exploring.
Annuities
Annuities are like personal pensions. You give a lump sum to an insurance company. They pay you for life.
That can be great for covering needs—like housing, food, and bills. Then your investments can fund your “wants,” like travel and grandkids.
Step 4: Review, Adjust, and Manage Taxes
Start With a Budget
Know exactly what your dream lifestyle will cost. This isn’t just bills—it’s concerts, sports events, travel, hobbies, and giving.
Rebalance Regularly
As your investments grow or drop, adjust. Rebalance your buckets so you’re not too heavy in one area. That helps you buy low, sell high, and stay disciplined.
Minimize Taxes
Diversify your tax exposure just like your investments. You have:
- Taxable Accounts (brokerage, real estate)
- Tax-Deferred Accounts (401k, IRA)
- Tax-Free Accounts (Roth, HSA, municipal bonds)
Having a mix can lower your tax bill and give you more flexibility.
Consider:
- Roth conversions
- Building a municipal bond ladder
- Using HSAs strategically
All this helps your money stretch further.
Step 5: Consider Delaying Retirement
Working longer gives your savings time to grow and reduces the years you’ll need to rely on it.
Benefits of retiring later:
- Still contributing to savings
- Delaying withdrawals
- Avoiding early Social Security
- Lower healthcare costs via employer coverage
It’s not the answer for everyone—but it’s one more lever to pull.
As always, I’m thankful for our time together. Stay safe and enjoy life.
Dre Griggs
P.S. – Join Me Live: Worry-Free Wednesdays
If all this feels like a lot, you’re not alone.
Every Wednesday, I host Worry-Free Wednesdays, a live event where we talk about the 5 hidden risks to a wealthy retirement. I’ll also share three simple frameworks to make sure your income, healthcare, and lifestyle are fully covered.
Join me and others who want a smarter, simpler path to retirement.
Visit ObsidianWisdom.com and click the button that says “I Want a Worry-Free Retirement.”
Let’s make sure your money lasts longer than you do.