Where Will Your Cash Flow Come From in Retirement?

cash flow in retirement

Most people think about income. But it’s really about cash flow in retirement.

If you’re starting to think about retirement, there’s a good chance one big question keeps coming up: Where’s the money going to come from?

You might have a general idea that your 401(k), IRAs, or other investments will play a role. Maybe you’re counting on Social Security or some rental income. But the real question isn’t just where the money is sitting. It’s how you’re going to turn those accounts and assets into a steady, reliable cash flow that supports your lifestyle for 20 or 30 years, maybe more.

This is the part that trips a lot of people up. 

According to the Federal Reserve, only about 31 percent of non-retired adults feel their retirement savings are on track. And even those who have saved enough are often unsure how to turn those savings into spendable money. 

That’s the gap we help close at KEEN Capital.

Income is just one piece of the puzzle.

The biggest shift we help clients make is this: don’t just look at retirement cash flow as income. That word, “income”, makes people think they need to load up on dividend-paying stocks, bonds, or rental properties. But you don’t need to live off interest alone. And in most cases, trying to do so leads to lower returns, higher taxes, or an unnecessary amount of complexity.

Cash flow simply means usable money. That can come from income-producing investments, sure, but it can also come from growth. 

Selling a few shares of a mutual fund or ETF at a gain creates just as much spendable cash as a dividend. The only difference is in how and when you access it.

So where does retirement cash flow actually come from?

For most people, cash flow in retirement comes from a mix of sources. That might include Social Security, a pension if you’re lucky enough to have one, interest from bonds, or dividends from your investment portfolio. Some people also receive income from rental properties or small business interests.

But here’s the part many people overlook. Retirement cash flow also comes from your ability to tap into capital gains. That means selling some of the investments you’ve built up over time. 

You may not think of selling shares as “income,” but it is cash in your account that you can use to cover your lifestyle. That’s why we think of retirement cash flow as being bigger than income alone. It includes income and growth, and both can be structured to work together.

Taxes matter more than you think.

Not all cash flow is taxed the same way. Pulling money from a Roth IRA feels very different than taking a required distribution from a traditional IRA. Qualified dividends and long-term capital gains are taxed differently than bond interest. Social Security is taxed for most people.

A smart retirement strategy uses these differences to your advantage. We help our clients choose what buckets to draw from in which years so they’re not just accessing cash, but keeping more of it in the process. 

Being able to control the source of your cash flow gives you more control over your tax bill. And the more flexibility you have, the more efficient your withdrawals can be over time.

Your retirement plan needs an income portfolio.

That’s why we design what we call income portfolios. It’s not a list of investments that produce a certain yield. It’s a system built around your real-world spending needs.

We use a bucket approach, which basically means dividing your portfolio into parts based on time horizon. Some of your money is held in stable investments to cover your spending in the near term. The second bucket is allocated as your “safety net”. This includes assets with less volatility that can protect cash flow needs for 4-5 years. And the rest is invested with a longer-term focus to continue growing and replenishing the other buckets over time. The growth bucket is critical to managing longevity risk and rising above inflation.

This approach works really well because it creates structure without boxing you in. You have both safety for near -term spending needs and opportunity to invest when markets decline. When markets decline sharply (which is inevitable), our clients do not have to worry about where their next month’s “paycheck” is coming from. Instead, they get excited at the opportunity to invest at lower prices.

You’re not guessing. You’re not trying to time the market. And you’re not forced to sell at the wrong time just to cover everyday expenses.

The goal is flexible, usable money for the rest of your life.

This approach gives you peace of mind that your next few years of spending are covered, no matter what the market does. It allows your longer-term investments to grow without constant interruptions. And it gives you a structure for making smart tax decisions year after year.

It also gives you the freedom to stop chasing yield. You don’t have to load up on bonds that don’t fit your risk profile or hunt down high-dividend stocks that carry more risk than you want and sacrifice diversification and non-dividend segments of the market. You can focus on total return, the combination of growth and income, and pull money in a way that supports your lifestyle and your bigger picture.

We help you turn your retirement savings into real-world cash flow.

At the end of the day, retirement is about freedom. 

It’s about using the wealth you’ve built to live life on your terms. That’s only possible when your money is set up to work for you, not the other way around.

If you’re wondering how your accounts, investments, or tax situation fit into a retirement cash flow plan, let’s talk. 

At KEEN Capital, we help clients structure their income portfolios in a way that’s flexible, tax-smart, and built to last.

You can book an introductory call with our team by using this calendar here

In the meantime, check out our popular post on Monte Carlo Retirement Planning for Dummies, we think you’ll find it useful. 

Until next time! 

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