Neil Fenning | Oct 15 2026 13:00
Saving for retirement and living on those savings are two different disciplines, and almost nobody is taught the second one.
For thirty years the instruction was straightforward, which was to contribute consistently, stay invested, and let time work. Then the paycheck stops, and the question inverts. Instead of how much can I put in, it becomes how much can I take out, from which account, in what order, and what happens if the market has a bad year while I'm doing it.
A distribution strategy is how that question gets answered. At A5 Financial, this work sits at the center of what we do for retirees and pre-retirees across the Seattle and Eastside area. The framework below is general, and the right version for any household depends on income needs, taxes, timeline, and risk tolerance.
Start with what the money has to do
Before mapping resources, get specific about the spending. Three categories are usually enough.
Essential expenses are the non-negotiables, including housing, insurance, health care, food, transportation, and taxes. This is the number that matters most, because it defines how much of your income needs to be reliable rather than merely probable.
Discretionary spending covers travel, hobbies, gifts, and dining out. It flexes, which makes it a useful shock absorber in a difficult year.
One-time expenses are the ones budgets tend to ignore, including a roof, a vehicle, a significant trip, or help for a family member. They are predictable in aggregate even when they are unpredictable individually, and planning for them prevents a portfolio sale at an inconvenient moment.
Map every resource against those needs
Next, inventory what you have to work with. That list typically includes Social Security, any pension, cash reserves, taxable brokerage accounts, tax-deferred retirement accounts, Roth assets, and in some situations insurance-based income sources.
The point of the inventory is not the total. It is matching reliability to obligation. Social Security and pension income arrive regardless of market conditions, which makes them natural candidates for covering essential expenses. Portfolio assets carry more variability, which makes them better suited to discretionary spending and long-term growth.
When there is a gap between reliable income and essential expenses, that gap is the actual planning problem, and it can be addressed several ways depending on the household.
Coordinate the order of withdrawals
The sequence in which you draw from different accounts affects how much tax you pay over a full retirement, and the effect compounds across decades.
Drawing from the wrong account in the wrong year can push you into a higher bracket, trigger the Medicare IRMAA surcharge, which is based on income from two years prior, or leave a large tax-deferred balance that produces oversized required distributions later. RMDs generally begin at 73 for those born between 1951 and 1959, and at 75 for those born in 1960 or later, and the years before they start are frequently the lowest-income years of a retiree's life.
That window is where a good deal of the planning value sits, because it may allow Roth conversions at a lower rate than the rate that applies once RMDs and Social Security are both flowing. How much to convert, and whether to convert at all, depends on your bracket, projected income, and other thresholds. Washington adds a specific wrinkle, because there is no state income tax but there is a capital gains tax that applies to higher earners.
There is no universal withdrawal order. The sequence that works is the one built around your particular accounts, income, and timeline, and it is revisited as tax law and circumstances change. We coordinate this with your CPA or tax professional, since planning and filing are different jobs.
Plan for volatility before it arrives
The risk that does the most damage in retirement is not a bad market. It is a bad market early, combined with withdrawals.
Selling investments at depressed prices to fund living expenses removes shares that would otherwise have participated in the recovery, and the effect on a portfolio can be lasting. This is often described as sequence-of-return risk, and it is a structural problem rather than a forecasting problem, which means it can be addressed structurally.
Our income ladder approach holds several years of expected income in principal-protected instruments such as CDs, high-quality bonds, or fixed annuities, separate from the growth portfolio. Because the near-term income is already set aside, a market decline does not force a sale at the wrong time. The growth sleeve stays invested and refills the near-term layer at more favorable moments.
No structure removes investment risk, and no strategy can guarantee a profit or protect against loss in a declining market. What this one does is change which risks reach your monthly income.
Account for the long tail
The remaining variables are the ones people prefer not to model.
Health care costs rise faster than general inflation for many households, and long-term care is among the largest expenses a retiree can face. Inflation quietly erodes purchasing power across a 30-year retirement, which is why an all-cash approach carries its own risk. Family support arrives unplanned. And longevity itself is the risk that amplifies every other one, because a plan built for 20 years and used for 32 will encounter problems that never appeared in the projection.
The practical response is not a single percentage. It is a plan reviewed annually, with spending tiers that can adjust and an income structure that does not depend on a favorable decade.
What this looks like organized
Picture a retired household that sorts its spending into the three tiers above, covers the essential tier with Social Security plus a set of scheduled maturities from the near-term layer, funds discretionary spending from the taxable portfolio, and keeps a separate cash reserve for one-time costs. Each year they review what was actually spent, refill the near-term layer from the growth sleeve if conditions allow, and adjust the following year's discretionary plan accordingly.
Nothing about that is exotic. It is simply organized, and organization is what makes a long retirement manageable when a single withdrawal percentage cannot.
Why A5
If your accounts were built for saving and have not been reorganized for spending, that is a common place to be and a solvable one. John Carruthers, CFP®, and Neil Fenning, CFP® work directly with every A5 Financial client, and a strategy review looks at whether your current accounts and investments are actually organized around the income you need.
Learn more about how we approach retirement income planning here.
