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Key Takeaways
- 93% of workers want 401(k) plans to offer lifetime income options, according to a study.
- Still, lifetime income can come from sources like Social Security, pensions, annuities, and thoughtfully planned withdrawal strategies using bonds, investments, or income-focused funds.
- A sustainable withdrawal strategy also involves thinking about spending needs and tax implications, as well as building a reliable income floor.
You’ve spent decades building your nest egg, but how do you turn that lump sum into a paycheck that lasts? According to a 2025 Nuveen and TIAA Institute study, nearly all 401(k) participants (93%) say they want retirement plans to offer guaranteed lifetime income options, yet most 401(k)s don’t.
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.
Why Smart Decumulation Strategies Are Hard
Retirement essentially flips the script on workers. “After decades of saving, people are suddenly expected to figure out how to spend it down in a way that lasts,” says Mark Stancato, founder of VIP Wealth Advisors. “There is no built-in structure, no paycheck, and considerable uncertainty.”
Between market volatility, taxes, and rising healthcare costs, many retirees feel unprepared to make that shift. The lack of structure can lead to over-withdrawing in the early years or being overly conservative and losing purchasing power over time.
Building a Paycheck From Savings
A strong first step to a great decumulation strategy is building a foundation of guaranteed income. “We begin by identifying fixed expenses and establishing a core income floor using reliable sources, such as Social Security or pensions,” says Stancato.
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.
What About Annuities and Other Income Tools?
For retirees looking to guarantee income, fixed annuities, which turn a lump sum into a predictable monthly paycheck for life, are often the first option considered. In fact, the Nuveen study shows that 90% of 401(k) participants would consider using fixed annuities to create a steady retirement income, and increasingly, plan sponsors are exploring ways to include fixed annuities in their 401(k) plans. However, they’re not your only choice.
“There are more tools now than ever,” says Stancato. Some retirement plans, for example, offer managed payout options or guardrail-based withdrawal strategies, while technology can help automate distributions and make spending more dynamic, adjusting to market downturns or personal circumstances.
You can also explore newer tools like target-date funds with income features or variable annuities with income riders, though these often come with added complexity and cost. The key is matching your plan to your lifestyle—something a one-size-fits-all product can’t always do.
Taxes Matter More Than You Think
Even with the best foundation, one of the most overlooked aspects of retirement income planning is the order in which you draw from accounts. To move your money efficiently, Stancato recommends following a tax-aware sequence: Start with taxable accounts, then move to tax-deferred accounts, and preserve tax-free assets like Roth individual retirement accounts for last. “Often that tax-free bucket becomes a legacy or long-term healthcare reserve,” he adds.
This sequencing helps minimize tax burdens over time and provides more flexibility to adjust as life or tax policy changes.
The Bottom Line
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,” says Stancato. “You need to know what each account is for and when you will need it.”
A thoughtful plan that matches income sources to spending needs, tax profiles, and lifestyle goals will help you get the most from your retirement years.
