For most of your adult life, the answer to that question was simple.
Your money came from a paycheck.
You showed up. You worked. You were paid. Taxes were taken out. Benefits were deducted. And what was left landed in your bank account like clockwork. There was a rhythm to it.
In retirement, that rhythm changes.
The money doesn’t disappear. But it no longer arrives in the same way. And even when you’re financially prepared, that shift can feel surprisingly unsettling.
Retirement Income Doesn’t Vanish – It Changes Shape
One of the biggest misconceptions about retirement is that income somehow stops when work ends.
In reality, it usually becomes layered.
For example, someone might receive:
- $2,400 per month from Social Security
- $1,200 per month from a pension
- $2,000 per month from IRA withdrawals
That’s about $5,600 per month, or roughly $67,000 per year.
It may not look like a traditional salary anymore, but it’s still income. It’s just coming from different places.
Instead of one employer providing it, several sources now work together. Understanding that structure often brings more calm than people expect.
Some Income Is Steady, Some Requires You to Decide
In retirement, income typically falls into two categories.
There’s steady income – like Social Security or a pension – that shows up each month once you claim it.
And then there’s income that depends on you making decisions.
If someone needs $60,000 per year to live comfortably and steady sources provide $42,000, the remaining $18,000 must come from investments.
That gap isn’t a problem. It’s simply part of the design.
But it does require intention.
You’re no longer just receiving income. You’re directing it.
That shift alone can make retirement feel heavier than expected.
What Happens When You Start Withdrawing?
Many people worry that once withdrawals begin, their portfolio will steadily shrink until it’s gone.
That’s usually not how it works.
A common starting guideline is withdrawing around 4% in the first year. If someone has $750,000 invested, 4% would be about $30,000.
The rest of the portfolio stays invested. It continues to grow or fluctuate, depending on how it is invested, and support future income.
The goal isn’t to spend everything down quickly. It’s to create income that can last 25 or even 30 years.
Of course, 4% isn’t a rule carved in stone. Some people withdraw less. Some withdraw more. It depends on lifestyle, health, age, and comfort with risk.
But having a framework can make the process feel less mysterious.
A Simpler Way to Picture It: The Bucket Approach
For some retirees, it helps to stop thinking of their portfolio as one large number and instead imagine it in “buckets.”
Each bucket serves a different time horizon.
Bucket 1: Short-Term Needs
This bucket contains one to three years of living expenses held in cash or conservative investments.
If annual spending is $60,000, that might mean setting aside $60,000 to $180,000 for stability. This money isn’t meant to grow aggressively. It’s there so market swings don’t affect next year’s income.
Bucket 2: Intermediate Needs
Here you place funds intended for the next three to five years. Often invested more conservatively – perhaps in bonds or bond funds – this bucket gradually refills the first one.
Bucket 3: Long-Term Growth
Money not needed for five years or more. This portion may remain invested in equities to help support growth and offset inflation.
Dividing assets this way doesn’t increase the total amount you have. But it can change how retirement feels.
When markets fluctuate, you know your immediate income isn’t tied to those daily headlines.
That kind of clarity can be powerful and liberating.
Taxes Still Matter in Retirement
Retirement doesn’t mean taxes disappear. In fact, taxes often become more layered in retirement, especially once required withdrawals begin.
Different income sources are taxed differently.
Social Security may be partially taxable depending on overall income. Traditional IRA and 401(k) withdrawals are generally taxed as ordinary income. Roth withdrawals, if qualified, are usually tax-free. Brokerage accounts may create capital gains in addition to income tax.
Two people withdrawing the same $60,000 per year could owe very different amounts in taxes depending on where that money comes from.
So “Where does your money come from?” isn’t just philosophical. It affects efficiency, too.
The Bigger Shift Is Psychological
During your working years, income was external. An employer generated it.
In retirement, income becomes internal. It comes from assets you built over decades.
That can feel empowering. It can also feel heavy.
But when you step back and see the full picture – steady income, flexible withdrawals, time-based buckets, tax layers – it often feels steadier than it first appears.
The money is still coming in.
It’s just coming from different places.
A Few Questions to Reflect On:
Do you feel clear about where your money comes from now? Does one source feel more secure than the others? Have you ever taken the time to map it all out in one place? And perhaps the most important question – does your income structure give you peace of mind?
I’d truly love to hear how this feels for you. Retirement looks different for everyone, and the more we talk about it, the less mysterious it becomes.
