Retirement Income Planning: What Is It, and How Do You Do It?

There are several questions that hopeful retirees are consistently asking as they seek to build a successful retirement.

Some of these questions are: 

  • When can I retire?
  • How much do we need?
  • Will I have enough?
  • What if there’s a major healthcare, stock market, or inflationary event that threatens what we’ve saved?

While all of these questions are certainly different from one another, they are largely variations on the same theme. And whether you’re an employee of a big company or a school, or a business owner who’s looking for the best ‘business owner retirement plan’, the destination is roughly the same. The moment when you have ‘enough’ means you can begin to consider how to use your savings, investments, and Social Security income to formulate a retirement income plan. 

At the core of a retirement income plan is either Social Security Income or a retirement pension that provides monthly income for life. If a retiree’s typical monthly expenses exceed the income provided by Social Security or the pension, then additional retirement income will need to be generated from retirement accounts like IRAs, 403(b)s, 401(k)s, etc. Withdrawals from these accounts can occur monthly, creating another source of ongoing income to allow retirement expenses to be paid. 

Essentially, the process of addressing the common retiree questions above requires converting one’s pile of money into an income that lasts as long as they do. When we can do that successfully, the risk factors can be managed quite well.  But how do we do it? Put more bluntly: “Adam, how do you know that this retirement income plan will work? 

When it comes to retirement income planning, there are a number of possible approaches; we’ll look at two of those here. 

 There are two distinct approaches in retirement income planning: probability-based income and guaranteed income.

Probability-Based Retirement Income Planning

The first relies on historical market performance and extrapolates those returns and offers a statistical probability of future success. For baseball fans, consider that your favorite hitter may have a batting average of .300, allowing you to run the numbers and expect that trend to continue into the future. Yes, there’s a 70% chance that he’ll not find success at the plate, and injury, illness, and an occasional slump may contribute further to some tough days for his fans, but you can expect him to perform comparatively well given his history.

Not unlike a hitter in baseball, the stock and bond markets can be counted on to deliver future performance that is quite similar to past performance, but – and repeat after me – past performance is no guarantee of future results. When things go well, they can go really well. When the market stumbles, however, a retiree’s ability to draw the necessary amount of income from a probability-based stocks and bonds portfolio can result in real failure, or at least diminished income and some sleepless nights. As defined in income planning terms, that means the money runs out before you were ready for it to do so.

Guaranteed Income Planning

For those who appreciate a sure thing, and sleep better at night when not reliant on finicky and volatile stock and bond markets, there is a way to have your cake and eat it too. The answer is to get you and your closest thousands of friends together and agree that some of you will live longer than expected, while others will fall short of a very long life. As such, you pool your money together and agree to make sure everybody receives an income for life, regardless of how long each person lives. The tradeoff? Some people get a little more than their fair share and others only get their fair share.

This annuity retirement plan arrangement, of course, involves highly-regulated insurance companies, very long-term investment portfolios, more cash reserves set aside than obligations created, something called reinsurance, and a state-run guaranty fund that ensures the whole thing pays out without the risk of going it alone in the stock and bond markets. Said more simply, a portion of a person’s nest egg is placed into an annuity.

By converting the appropriate portion of your pile of retirement money to this arrangement, a stream of payment checks arrives in your bank account each month for the rest of your life, guaranteed. The rest of the money you may have set aside is able to live in the finicky and volatile stock and bond markets described above.  Since these markets often provide superior long-term growth, that means you’ll allow yourself the means with which to manage a health care event, inflationary era, and occasional market drops…all while enjoying a retirement income that lasts for the entire life of you and your spouse.

Synergy, In Summary

When approaching retirement, income planning is where it all starts. It’s on this foundation that all else is built. With the right architect, a clear blueprint, and materials that will stand the test of time against the elements, you create for yourself a fiscal house that allows you to get to the most from your money and the best for your life.

See, when we embrace the risks and anticipate them, we allow a sort of double vision to occur. We can protect what’s needed and prosper to achieve what’s wanted. I call it synergy, you can call it what you’d like. 

Meet Our Team

Adam Cufr

Adam Cufr


Principal, Retirement Income Certified Professional®

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Dave Bensch

Dave Bensch

Director of Operations

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Stephen Hanley

Stephen L. Hanley


Chief Investment Strategist

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Fourth Dimension Financial Group

27121 Oakmead Dr. Suite B
Perrysburg, OH 43551

Phone: (419) 931-0704
Email: dave@fourthdimensionfinancial.com