Oct. 27: BEST FROM THE BLOGOSPHERE

October 27, 2025

The tricky part of retirement – turning savings into income

You’ve got to the point where you are ready to retire – you’ve saved up a nice nest egg. But now comes the tricky part, turning that lump sum of money into income you can live on.

A recent Investopedia article took a look at what it calls “the part of retirement planning no one talks about – turning savings into income.”

“Navigating the math of decumulation –how to draw down savings without running out — is one of the biggest blind spots in retirement planning. And while lifetime income tools are gaining traction, the foundation of a secure retirement still lies in a smart withdrawal strategy — one that balances your need to live well today with the reality of funding a future that could last decades,” the article begins.

It’s basically flipping the script for most people – you are now trying to sustainably spend the money you just finished saving for years.

“After decades of saving, people are suddenly expected to figure out how to spend it down in a way that lasts,” states Mark Stancato, founder of VIP Wealth Advisors, in the article. “There is no built-in structure, no paycheque, and considerable uncertainty.”

The risk, the article adds, is “over-withdrawing in the early years, or being overly conservative and losing purchasing power over time.”

One route to deal with retirement income needs would be to structure your portfolio so that it “builds a foundation of guaranteed income,” states Stancato in the article. For instance, fixed expenses might be covered by a “core floor” that includes government income from the Canada Pension Plan and Old Age Security, as well as any workplace pension benefits you might have that deliver a monthly pre-determined income.

“From there, you can structure your income sources and assets using what’s known as a bucket strategy. Short-term spending needs are covered with cash or bonds, while medium- and long-term needs can rely on equities and other growth-oriented investments, effectively giving your portfolio room to grow while still supporting your near-term liquidity needs,” the article continues.

Another way to guarantee how much money your investments will generate is through an annuity, the article explains.

“Annuities, which turn a lump sum into a predictable monthly paycheque for life, are often the first option considered,” the article points out. A recent Nuveen study in the U.S. found that 90 per cent of members of 401 (k) plans (similar to a registered retirement savings plan or defined contribution plan) “would consider using fixed annuities to create a steady retirement income.”

“Turning a nest egg into retirement income requires more than just taking withdrawals — it requires intention, strategy, and adaptability. “The biggest mistake people make is treating every dollar the same,” Stancato states in the article. “You need to know what each account is for and when you will need it.”

Members of the Saskatchewan Pension Plan have the option of an annuity when they decide to retire. SPP’s Pension Guide provides full details on the plan’s life only annuity, joint and last survivor annuity and refund life annuity.

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Investopedia

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