ALL IN THE TIMING
There's a big difference between a regular
source of income - such as a Social Security check that's direct-deposited
in your account each month - and income that's less predictable
or even unexpected, such as an inheritance. Extra money can come
in handy, but you can't depend on it to pay your bills.
But if you've planned ahead,
your investments can play an important part in providing additional
regular income to offset predictable costs - the ones that
are due every month or quarter.
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You
can get regular income from investments in several ways, based on
the kinds you own. Some, like bonds, pay interest on a regular,
predictable schedule. A number of stocks pay quarterly dividends.
You can also set up a system of regular withdrawals, or use cash to buy an immediate annuity, which can
provide fixed or variable income paid out in regular, usually monthly,
installments for a specific period of time, for your lifetime, or
for two lifetimes.
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ADDING UP THE INCOME
The big question is whether your combined sources
of income will produce enough money, year in and year out, for as
long as you need it. The answer is that they can, if your return,
or earnings on those investments, is greater than the rate of inflation.
For example, several well-known companies
have paid dividend income to shareholders for years
while the market value of their shares has fluctuated. If you owned
enough shares, you could count on the quarterly dividend payments
to help cover some of your predictable costs. You could also sell
some shares when the price increased a certain percentage and add
the proceeds to an income-producing account.
 On the other hand, growth rates aren't predictable and dividends
aren't guaranteed. So there may be periods when income and growth
slows or drops. That's why it's essential to own
a variety of investments, including some that guarantee a steady,
if less than spectacular, rate of return.
MANAGING YOUR INCOME
If you have a varied portfolio of investments
in place as you approach retirement, you'll make out best if you
know how to tap them in the most productive ways. Here are some
of the things to consider:
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Learn the difference between investments designed to be
depleted, or used up in your lifetime, and those better suited to building an
estate
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Create a withdrawal schedule to ensure that your
assets last as long as you need them,
usually for your estimated lifetime and perhaps your spouse's
estimated lifetime as well
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Compare the tax consequences of different
types of investments so you get to keep more and pay Uncle
Sam less over the years
DEPLETE OR PRESERVE?
Depending on your own needs and objectives, you can consider whether you want to use most of your assets during your lifetime so that your estate will be small, or you want to build an estate.
For example, federal tax law requires you to
set up withdrawals from pension plans and traditional IRAs so you're using up
those assets during your lifetime. Making regular withdrawals from
your nonqualified annuities, also called flexible premium annuities, which are also designed as retirement income programs,
works the same way.
 
In contrast, you can invest to build your estate,
which means preserving rather than depleting your assets. You're
free to leave your taxable investments untouched if you don't need
the money, or you may choose to withdraw some of the earnings while
leaving the principal to grow. Of course, there's nothing to stop
you from investing both ways, building some accounts you intend
to deplete to subsidize your retirement and others you intend to
preserve to leave to your heirs.
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If you don't want to scale back your plans for retirement, you must
be able to afford them. That starts with making investments before
you retire so that the income is available as you need it. The second
and equally important part of the job is managing the income so
your financial life runs smoothly.
