Editor’s note: Charles Schwab is a paid sponsor of this website and this content is for educational purposes only.

Like so many women in our Sixty and Me community, the landscape of my life is continually shifting. I spent 40 years working full time in the technology business while raising my two boys and balancing life and work. I retired from the corporate world eight years ago and started Sixty and Me.

I was 63 then, and starting this business redefined my concept of retirement dramatically. Now I imagine working forever – and loving it! How many 60-somethings can say that?

However, today’s earnings are not the same as what I had coming in when working full time in the corporate world. So, while it is great to be running my own business, I still have to work out how to turn my retirement savings into a retirement paycheck to supplement my income.

It’s not as straightforward as it might sound, and lots of people are trying to muddle through this financial puzzle. Charles Schwab recently surveyed 401(k) participants and found that ‘creating an income stream in retirement’ is one of the top three areas Boomers want advice on.

Writing about the importance of financial security has always been a focus for Sixty and Me. Women are living longer, healthier lives, which makes the question of how to turn retirement savings into an income even more relevant and important.

I am not good at asking for help. When it comes to creating my retirement paycheck, I wish I had asked more questions and sought help from a financial expert sooner. So, let me tell you a few things I have learned the scenic way.

First Things First: How Much to Save?

In the past, I made assumptions that I would age well and financially maintain the lifestyle I wanted to enjoy when I stopped working full time. Those notions were challenged, and the mistakes I made were amplified.

By not having a clear idea of my retirement savings goal earlier, I find myself facing questions now that I could have avoided:

  • Have I saved enough money?
  • Will I be able to afford unexpected health expenses or loss of income due to things like a pandemic? (Who had that word in their vocabulary two years ago?)
  • What changes will I have to make to my lifestyle to enjoy both financial security and freedom?
  • Can I afford to travel?
  • Will I have to downsize my home?
  • Is it important to leave a financial legacy for my children and grandchildren?

Determining how much you will need for retirement is crucial. Schwab’s survey found that, on average, Boomer participants said they expect to retire at 67, need $1.6 million saved, and estimate that their retirement savings will last 25 years.

Many people don’t know how much they need to save for retirement at all – including two in five Boomer women.

No matter what stage you are in – the final years of working, or already in retirement – you need to have a good handle on how much retirement income you need. This number becomes the anchor for all the other decisions you make, like changing your savings rate (if you are still working), adjusting your asset allocation, determining how to use your various income sources or adjusting your expenses if you have retired.

A simple way to start is by using a retirement income calculator. If you have a 401(k), your plan likely has one that considers your goals and current savings and estimates how much you will have and what the gap might be. You can also go directly to an online calculator such as Schwab’s Retirement Savings Calculator and plug in your details for a quick snapshot to get your planning process started.

Know Your Income Sources and Maximize Them

When I worked full time at Microsoft and Siemens, I contributed to a 401(k), and my retirement nest egg is grateful I did.

401(k) plans will be the top source of income for most participants in Schwab’s survey. For Boomers, Social Security plays a more significant role than it does for younger generations. On average, Boomers expect their 401(k) to make up 29% of their retirement income, and Social Security to deliver 26%. Compare that to Generation X, who think Social Security will only be 16% of their retirement income, and Millennials who say it will be less than 10%.

While we might be relying more on Social Security, if you have a 401(k), it is still important to maximize your contributions while you can. Less than a third of Boomers contributed the maximum allowed in 2019. In 2020, the contribution limit is $19,500, and employees aged 50 and over can make additional catch-up contributions of up to $6,500.

If your employer gives you a match, make sure you contribute at least enough to your 401(k) to get the match. Otherwise, you are just leaving money on the table.

It is also important to look at other income sources and consider how they play into the big picture. The data shows that most Boomers are also saving for retirement in savings accounts or via IRAs, and they expect these other vehicles to deliver 15% of their retirement income.

The Schwab Center for Financial Research has a four-step process that can help you work out how to tap all your income sources to generate a reliable income stream.

Get Advice

As I said at the beginning, I wish I had sought advice sooner. At a minimum, getting the help of a financial professional increases your confidence when making investment decisions. The Schwab study found that only 23% of Boomer women are confident in making 401(k) investment decisions independently, but 55% feel confident when they have the help of a financial professional.

The good news is that there are so many options for getting advice. Start with your workplace retirement plan. Most 401(k) plans have free or low-cost advice options, along with lots of self-help resources and education.

Outside of your workplace plan, there are many ways to get advice, depending on how you like to work and what you need. If you are more self-directed, you might consider automated (robo) advice solutions. But if you like the idea of talking to someone, you could work directly with a financial professional. Or, if your situation is a little more complex, you could even work with an independent financial advisor. Here’s a good resource to help you find one: findyourindependentadvisor.com.

I’ll close by noting that the pandemic has highlighted how important it is to be flexible with our retirement plans. I know that I may need to adjust my retirement plan and investment portfolio in the future, but I have learned to be resilient and more at peace with change.

Having the luxury of financial flexibility comes with good planning upfront. In the face of uncertainty, I encourage all of the women in our Sixty and Me community to get advice and have a plan so that you can have flexibility, and a right-sized retirement paycheck, when living your future.

Do you have a retirement plan? Are you investing in a 401 (k), into a savings account, or an IRA? How long do you plan to make your retirement money last? Do you feel confident about your plan? Let’s have a conversation!

Disclosures:

Charles Schwab is a paid sponsor of this website and this content is for educational purposes only. No information presented constitutes a recommendation by Charles Schwab or any of its affiliates to buy, sell, or hold any security, financial product, or instrument discussed therein or to engage in any specific investment strategy.  

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.

Supporting documentation for any claims or statistical information is available upon request.

The Charles Schwab Corporation provides a full range of brokerage, banking and financial advisory services through its operating subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC), offers investment services and products, including Schwab brokerage accounts.

(1020-02EA)

Let's Have a Conversation!