How to Generate Income When the Paycheck Stops

By Greg Gohr

There are few financial topics more important—and more misunderstood—than knowing how to retire the right way. What I mean by that is some people seem to think that all you need to do is learn some retirement rules of thumb (like the 4% rule), and then you can be on your way to a comfortable retirement. However, the reality is that there’s a lot more to consider than your distribution strategy.

For those of you who aren’t familiar, the 4% rule states that you can take a 4% distribution from your investment accounts each and every year, increase that distribution yearly for inflation, and have a high degree of confidence that you won’t run out of money in a 30-year retirement period.

While that is a useful starting point, it does not consider the other factors required to create a sustainable monthly paycheck. Since mistakes in retirement income planning are magnified, as compared to the accumulation phase where there is time to make up for mistakes, it therefore becomes even more important to review all areas of your income strategy to make sure you have the right plan in place. Here’s what you need to do to get started. 
1. Create a Comprehensive Financial Plan
A comprehensive financial plan is essential to generating income when your paycheck stops. This plan should take into account all your assets, liabilities, and income sources, as well as your short-term and long-term financial goals that are discovered through answering a copious list of important questions. 

Once a plan is created, you should also evaluate different scenarios in the plan: What if you downsize? What if you move to a lower-cost-of-living state? What if you have unexpected health expenses? While we can’t predict the future, we can plan ahead for different types of contingencies, so we know what we need to do when something unexpected happens.
2. Project Your Expenses
A key part of your comprehensive plan will also be to project your future expenses during different phases of retirement. At our firm, we encourage our clients to identify all their expenses and categorize them into basic needs and discretionary spending. Basic needs include expenses like housing, food, transportation, taxes, healthcare, and utilities. Discretionary spending includes expenses like travel, leisure activities, hobbies, gifts, charities, and one-time purchases. Will any of those expenses increase or decrease over time? Typically, discretionary expenses decline as people get older, but that’s not always the case.

It’s also important to remember that if you’re under 65 and retired, you may incur significant healthcare costs until you’re able to enroll in Medicare, and should factor those costs into your plan.
3. Consider Your Income Sources
Retirees may have a number of options they can use to create an income. Social Security will be a significant source of income for most retirees, which is usually supplemented with distributions from your IRAs, 401(k)s, and investment accounts. If you are one of a fortunate few, you may have a pension, which can materially impact planning scenarios, and the same holds true for other sources of guaranteed income like annuities. Part-time work that is satisfying and rewarding can also factor into the income calculus.

Some questions that come to mind:

When will you take Social Security? When will your spouse take it?
Will your pension have an inflation adjustment?
Will you choose a survivor benefit on the pension or annuity?
How does the plan account for longevity, or longevity disparity between spouses?
If you have a part-time job, should you spend that money or contribute it to a retirement account?
How will you determine the order of withdrawals from retirement and investment accounts?

4. Revisit Your Risk Tolerance
As you approach your retirement, it’s also key to revisit your risk tolerance. Perhaps you were fairly aggressive with your investments while you were working and trying to accumulate as much money as possible; but the last few years before retirement and the first few years of retirement are fraught with risk. Therefore, it is critical to continually stress-test your plan to feel confident your retirement paycheck can weather some worst-case scenarios.   
5. Review Your Investment Portfolio
Finally, it’s wise to conduct an in-depth review of your investment portfolio. While there’s too much to cover than we have space for in this article, there are three essentials to this review.

First, consider structuring your investments so they can bridge the gap between what you want to spend per month, and what you’ll be receiving from stable sources of income like Social Security, your pension, and annuity income. Then see if it’s realistic for you to distribute that difference from your investment accounts.
Second, make sure to consider if you have the right investments in the right types of accounts (known as asset location). Some investments are better suited in a Roth IRA while other investments are better suited in a taxable, non-retirement account.
Third, consider a “bucket” approach where you have separate accounts with different goals. You could have a cash account with one to three years of living expenses saved up, another account receiving interest and dividends from various investments, and a third account more geared toward long-term growth. 

Are You Ready to Retire on Your Terms?
As you approach retirement, we want you to have the confidence and clarity that you’re on the right track to live the rest of your life on your terms. If you’re interested in partnering with financial specialists to make that happen, we’d love to see if we can help. To get started, contact us  today at 781-455-1020 or email
About Greg
Greg Gohr is a Wealth Advisor at FSA Wealth Management, a Registered Investment Advisor firm offering fee-only services and known for its independence, objectivity, and results. With over 20 years of industry experience, Greg has extensive knowledge in all aspects of advisory platform business and specializes in helping individuals, families, small businesses, and professional organizations realize their financial goals. He desires to empower his clients’ financial well-being through delivery of customized wealth strategies through every phase of the long-term journey.


Prior to joining the financial services world, Greg spent the first 10 years of his professional life pursuing his lifelong dream of playing Major League Baseball. Like many professional athletes, his playing career was much shorter than he would have liked. After brief stints coaching at both the professional and college levels, Greg embarked on a career in financial services, determined to synthesize his lifelong interests in personal finance, investing, and coaching. 

Greg graduated from Santa Clara University and completed his CERTIFIED FINANCIAL PLANNER™ coursework at Merrimack College and holds the Accredited Investment Fiduciary® designation. Outside of work, Greg, his wife, Kristen, and his dog, Sammy, aspire to climb all 48 4,000-footers in New Hampshire (they’re about halfway there!). A former rock-skipping champion of Waterville Valley, NH, Greg thinks bicycles are one of the most important inventions in human history, believes pizza is proof of intelligent design in the universe, and he is grateful to serve his community as a member of the Knights of Columbus. To learn more about Greg, connect with him on LinkedIn.