A Real Life Look: Transitioning to Retirement

Cash Flow

Transitioning from a steady paycheck to drawing income from retirement savings can be a significant adjustment. Even with adequate resources, the shift from saving and accumulating wealth to spending down assets can feel unfamiliar. For some retirees, this change involves not only financial planning but also a shift in mindset. Years of disciplined saving can make it challenging to feel comfortable using the funds you’ve worked to build.

A thoughtfully designed cash flow plan can help provide structure and reduce uncertainty. Elements of such a plan may include:

Maintaining a cash buffer — keeping readily available funds to cover several months of expenses, which may help avoid withdrawing from investments during market declines.

Scheduled withdrawals — establishing regular transfers from retirement accounts to create a predictable income stream that mirrors a paycheck cycle.

Income diversification — combining sources such as Social Security, pensions, dividends, and planned withdrawals from savings to help spread risk and maintain stability.

The right approach depends on each individual’s financial circumstances, income needs, and overall retirement strategy.

Tax Planning

Tax-efficient retirement withdrawals can be complex, and without careful planning, tax liabilities may reduce the amount of income available to you in retirement. A thoughtful withdrawal approach can help manage how much of your income is subject to tax while supporting your long-term financial needs.

Under current tax laws, some approaches that may be considered include:

Adjusting tax withholding on pensions, Social Security, or retirement account distributions to help manage year-end tax liabilities or reduce the risk of underpayment penalties.

Roth conversions during lower-income years, which move funds from tax-deferred accounts (such as a traditional IRA) into a Roth IRA. While this generally results in taxes owed in the year of conversion, it may reduce future required minimum distributions (RMDs) and allow for tax-free withdrawals later, subject to current IRS rules.

Coordinating withdrawals with tax bracket thresholds to help avoid unintentionally moving into a higher tax bracket in a given year.

Using taxable investment accounts strategically, such as realizing long-term capital gains during lower-income years, which may be taxed at lower rates.

Considering Medicare premium thresholds (IRMAA surcharges), which can increase if your taxable income exceeds certain limits.

Social Security

Social Security can be an important component of retirement income, but timing and strategy play a role in determining your benefit amount. You may begin collecting benefits as early as age 62, though doing so before your full retirement age (typically 66–67, depending on birth year) will result in a permanent reduction. Under current Social Security rules (which are subject to change), delaying benefits beyond your full retirement age may result in increased monthly payments, up to certain limits.The decision should be based on your personal health, income needs, and other retirement resources.

When evaluating your Social Security claiming strategy, you may wish to consider the following factors.

Health & Life Expectancy – longer life expectancy can favor delaying benefits.

Current & Projected Income Needs – starting earlier may provide necessary cash flow.

Other Retirement Resources – such as investment accounts, pensions, or spousal benefits which can provide flexibility in timing.

Important Disclosures:

This material is for informational and educational purposes only and is not intended to provide specific financial, tax, investment, or legal advice. The examples and strategies discussed are hypothetical and may not be appropriate for all individuals. The information is based on current laws, regulations, and Social Security rules, all of which are subject to change at any time and may affect the accuracy of the content.

Retirement income strategies, including cash flow planning, tax planning, and Social Security claiming decisions, should be developed based on your unique circumstances, goals, risk tolerance, and time horizon. Past strategies or outcomes do not guarantee future results.

You should consult with a qualified financial advisor, tax professional, and/or the Social Security Administration before making any decisions related to your retirement income, tax planning, or Social Security benefits.

Keating Financial Advisory Services, Inc. (KFAS) is an SEC-registered investment advisor. Registration does not imply any level of skill or training. All investing involves risk, including possible loss of principal. Our Form ADV Part 2A, which contains important information about our services and fees, is available at www.adviserinfo.sec.gov or upon request.