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Retirement Income Approaches

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Consider these common approaches for generating retirement income to help you decide what's best for your situation.

Use this chart to consider the pros and cons of three common strategies for generating retirement income.

Income Approach Consider If Benefits Risks Savings Needed for 30-Year Retirement
Interest and dividends only

You have a sizeable portfolio and are extremely uncomfortable with dipping into your principal.

Easy to understand and implement.

Helps preserve your savings for your heirs.

Requires a larger portfolio.

Income is more susceptible to rate fluctuations.

Little protection from inflation.

30+ times the first-year withdrawal.1

First-year withdrawal:

Your first-year withdrawal is the amount of money you need to cover a year’s worth of expenses, minus other sources of income such as Social Security, pensions, real estate, or part-time jobs.

Example:

Annual living expenses including taxes
$60,000
Annual income from Social Security
($24,000)
First-year withdrawal
$36,000

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Total return

You need both investment income and withdrawals from principal to cover your retirement expenses.

Requires a smaller portfolio than the "interest and dividends only" approach.

You could potentially outlive your savings.

25 times the first-year withdrawal.2

First-year withdrawal:

Your first-year withdrawal is the amount of money you need to cover a year’s worth of expenses, minus other sources of income such as Social Security, pensions, real estate, or part-time jobs.

Example:

Annual living expenses including taxes
$60,000
Annual income from Social Security
($24,000)
First-year withdrawal
$36,000

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What if you don't have this?

What if you don't have this?

A Schwab Retirement Consultant can help you create a realistic plan for working with what you have now. Call 877-673-7970 for a personal consultation.
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Total return with annuity

You want guaranteed income from a portion of your savings and are willing to give up some control of the assets you invest in an annuity.

A guaranteed source of income regardless of market movements.

Less risk of outliving income.

Inflation can erode the buying power of fixed payments unless the annuity includes inflation protection.

Assets may not be available for big emergency expenses.

May be slightly less than 25 times the first-year withdrawal.3

What if you don't have this?

What if you don't have this?

A Schwab Retirement Consultant can help you create a realistic plan for working with what you have now. Call 877-673-7970 for a personal consultation.
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Already a Schwab client?

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