By Rich Guerrin, President and Chief Executive Officer, PNC Investments

Uncertain economic conditions, high inflation and debates about the future of Social Security have left workers and retirees alike wondering how they’ll support themselves when they no longer have a steady income from their career.

Daily headlines about adverse market forces can make this an unsettling time to think about maintaining a lifestyle or even meeting basic needs in retirement. Helpfully, there are strategies that are less influenced by the ebbs and flows of the stock market that can provide smart and comfortable options as you approach this next stage of your life.

Before you consider those strategies, it’s imperative that you have a comprehensive financial plan that takes into account your goals, needs and objectives. We often stress to clients that the first step to creating a comfortable income stream in retirement is talking to a professional advisor and working together to build a plan to save for the lifestyle you want to live once you’re done working. The basics of the plan should target what type of income you think you’ll need to cover your fixed and variable expenses. These expenses include things like food, housing and healthcare. They also include expenses for luxuries like travel, housing, dining out and hobbies. Depending on when you plan to retire, your plan should cover 20-30 years’ worth of expenses.

A financial professional can help you develop savings and investment strategies tailored to your individual goals while also identifying potential roadblocks. Still, even the best retirement plans offer only an educated guess as to what you will need to fund your lifestyle once you are done working. Rising inflation, an underperforming market and unexpected life events are impacts to cost of living that are tough to foresee and can pose a threat to your retirement lifestyle plans. As you approach retirement you should continue to reevaluate your savings strategy and consider if you will need additional income to support your needs.

It’s important that you’re honest about your own financial reality as retirement approaches. Be willing to ask yourself tough questions like, “Did I save enough?” And if you find the answer is ‘No’ then be ready to adjust your plan to fit your revised reality. While righting decades of insufficient saving in a compressed timeframe may not be possible, you can work with your advisor on ways to supplement or stretch what you have been able to save.

Supplemental income strategies can complement Social Security or withdrawals from a retirement account. Those strategies may include investing your nest egg into a financial instrument that is immune or sheltered from swings in the markets, or one that may better take advantage of rising interest rates due to inflation.

In this space in the coming months, we’ll explore four options for generating supplemental retirement income while making your money last through retirement:

  • Managed Accounts – A managed account can provide income in the form of dividends and interest while seeking to provide some capital appreciation that helps you stay ahead of inflation. Building a managed portfolio of stocks, bonds, alternative investments, and cash can be a productive way to generate both income and growth to supplement your expenses in retirement. 
  • Liquidity Management – Investing in liquid assets can help prevent the need to permanently exit investments for cash during a down market.  Brokered CDs, U.S. Treasury securities and other short-term bonds are a good example of how clients can better manage their liquidity in retirement. These solutions can oftentimes throw off enough income to supplement your daily living expenses without having to dip into your principal.
  • Guaranteed Income for Life – You can also consider financial products, like annuities, that provide guaranteed income for life. These products feature income solutions on an immediate or deferred basis and in many cases, these types of products can provide income for you and your partner’s life expectancies, with provisions that adjust for inflation so you can stay ahead of rising price levels that can quickly deplete your purchasing power.  
  • Cash Management – An oftentimes overlooked necessity when it comes to financial planning is having an emergency fund to meet those unexpected expenses. This cash should be invested in very liquid financial instruments that are easily accessible when you need them but also generate some extra cash. In this current market environment, liquid cash management products can pay a decent yield while ensuring that you’re prepared for almost any eventuality. These cash management products oftentimes include bank-sweep programs, money market mutual funds and short-term CDs. 

Each of these options carry with it benefits and risks based on your existing retirement plan, the assets you currently have available to invest and the timing of your need for supplemental income. An advisor can help evaluate these, and other options, to determine what might be right for your individual situation.

It’s impossible to predict what will happen in our lives and in the market that could impact retirement savings. But, planning in advance, periodically reevaluating your plan and making adjustments as your life situation changes, can put you in the best position to enjoy the retirement you worked so hard to earn.