Retirement Blueprint 2: Create Income Streams 

Retirement is a new phase in your financial life that involves changes in lifestyle and spending. It can be an adjustment to generate your own retirement income, often from a fixed amount of assets. A good way to make it work is to plan for multiple income streams.

More Income Sources = Greater Financial Security

With the average American living into their 80s (and some well beyond), and future Social Security and pension income uncertain, most of us will need to tap our savings and investments for retirement. Using multiple sources of income helps protect against risk and address various needs. Income streams from personal retirement funds typically fall into two basic categories: systematic withdrawal from savings and investments and a lifetime income plan that converts retirement savings into a fixed, regular income stream.

Your Northwestern Mutual financial representative can help you develop the right retirement income plan for you, considering personal, financial and family circumstances and taking into account all available income streams. These may include:

Social Security – Benefits paid to eligible individuals, their spouses and dependents based on career earnings. Available as early as age 62, the amount varies based on the retired worker’s birth date and when he or she chooses to receive benefits.

Defined Benefit (Pension Plan) – If provided by an employer, pension plans generally promise to pay employees a retirement benefit based on a formula and offer the option to receive payment in different ways, including continuing partial benefits to a surviving spouse. Choosing the right option for you would involve analyzing your needs and availability of other resources – your financial representative can help.

Employment – Part- or full-time employment may supplement income for a time, but it is best to plan so employment is a choice rather than a necessity – you don’t want to be at risk if your health or job opportunity suffers.

Annuities – These provide guaranteed income for a defined time period, which can include your lifetime and/or your spouse’s lifetime, and also offer a guaranteed death benefit while you’re accumulating for retirement. Annuities are gaining popularity because they provide a consistent retirement income and ensure people won’t outlive their assets. Contracts are designed for retirement and can be established with either pre-tax dollars (qualified) or after-tax dollars (nonqualified). Two types of contracts offer a choice of either fixed or variable rates of return – income annuities where funds are converted to a steady stream of income upon purchase, and deferred annuities that allow you to accumulate funds, tax-deferred, and then convert to an income stream at a later date. Your financial representative can discuss your options to help you decide if an annuity is right for you.

Qualified retirement plans, IRAs and 403(b) plans – Traditional retirement plans including those sponsored by companies, individuals and non-profit organizations, respectively, typically are created from tax-deductible individual and employer contributions that grow, tax-deferred, until distributed. Most have minimum distribution requirements and penalties for withdrawing funds before age 59-1/2. Learn more about IRAs and 403b plans.

InvestmentsMutual funds, stocks, bonds, money market and savings accounts, certificates of deposit, and investment trusts, among other investments, are not subject to contribution limits or penalties for early withdrawal if they are held outside of a qualified retirement plan. They are generally subject to annual taxation on earned interest, dividends and capital gains.

Business/investment property – Real estate and business interests may require more time to sell than other investments, so your retirement income plan needs to include a thoughtful exit strategy that considers timing, taxation and other aspects of sales proceeds.

Cash value life insurance Permanent life insurance in retirement can not only support the continuing needs of a surviving spouse or family member, it can create supplemental retirement income through withdrawals, policy loans or cash dividends. It also can provide an effective and tax-efficient way to leave a legacy by transferring assets to the next generation and/or to charity.

During the working years, your retirement savings plan helps you accumulate assets based on individual goals and financial circumstances. When it is time to begin distributing your funds, it is just as important to have a personalized retirement income plan to effectively manage and distribute your retirement savings. Your financial representative can be your resource and guide in developing the best plan to deliver your own steady retirement income.