Turning Savings Into a Paycheck: Retirement Income Planning in South Dakota

For years, your paycheck came from an employer. Taxes were withheld, benefits deducted, and what hit your account was yours to spend. Retirement flips that script. Suddenly, you become the one deciding when and how to pay yourself.

For many South Dakotans nearing retirement, this can be one of the most important financial transitions — and one that naturally comes with questions:

• Which account should I draw from first?

• How do I balance taxes, Social Security, and Medicare costs?

• How can I make sure I don’t outlive my savings?

Step 1: Know What You Have — and What You’ll Need

The first step in creating a retirement paycheck is knowing what you’ll spend each month — and which expenses may change over time.

According to the U.S. Bureau of Labor Statistics 2024 Consumer Expenditure Survey, housing, healthcare, and food remain the top spending categories for retirees, even in low-cost states like South Dakota. Once you estimate your needs, identify reliable income sources — Social Security, pensions, and investment withdrawals.

The Social Security Administration (SSA) offers an online Retirement Estimator that helps you compare benefits at different claiming ages. Waiting until full retirement age or beyond may increase your monthly benefit — though timing should fit your broader tax and income picture, not just the biggest number on the page, but what fits your real-life plans.

Step 2: Understand the Tax Layers

South Dakota’s lack of a state income tax gives retirees an advantage —but federal taxes still apply to IRA withdrawals, Social Security benefits (for higher-income households), and investment income.

The Internal Revenue Service (IRS) states in Publication 590-B (2024) that Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s must begin at age 73, and those withdrawals count as ordinary income. Coordinating RMDs with other income may help manage your overall tax exposure.

Roth conversions — moving assets from a traditional IRA to a Roth IRA — can also be a planning tool. Paying tax now may create more flexibility later, as qualified Roth withdrawals are generally tax-free in retirement (per IRS Publication 590-B). These decisions are best made with professional guidance, since timing and income thresholds matter.

Want a clearer view of how Social Security timing and Medicare enrollment fit into your income plan? Our free Retiree’s Timing Guide breaks down how to Align Income, Health Coverage, and tax considerations in retirement.

Download the Guide

Step 3: Sequence Your Withdrawals

The order in which you tap different accounts can significantly impact how long your money lasts.

A common strategy, outlined by the Financial Industry Regulatory Authority (FINRA), is to first draw from taxable accounts, then tax-deferred accounts, and lastly Roth accounts. This approach may allow tax-advantaged assets to continue compounding for a longer period — but it’s not one-size-fits-all.

South Dakotans who have built up farmland, equipment, or property equity may also need to consider liquidity — ensuring they have enough accessible cash to meet living expenses without feeling pressured to sell land or investments when the market dips.

Step 4: Build Guardrails, Not Guesswork

A well-built income plan doesn’t rely on predicting markets — it builds guardrails that adjust as life unfolds.

Morningstar’s 2024 State of Retirement Income Report indicates that retirees who use a rules-based withdrawal approach may preserve savings longer and experience less stress about market swings.

A “guardrail” income plan brings structure and peace-of-mind:

• A target monthly “paycheck.”

• A sustainable withdrawal range (for example, 3.5–5% annually).

• A plan for how to adjust in up or down markets.

  
  

That clarity — knowing when to tighten or loosen spending — can be as important as the investments themselves.

Step 5: Keep the Plan Moving

Retirement isn’t a one-time event; it’s a 25–30 year phase that will evolve with markets, healthcare, and life changes.

Reviewing your plan annually — or when new laws or family needs arise — helps ensure your income stays aligned with your goals and risk comfort.

As one of the few states without a personal income tax, South Dakota offers retirees a strong foundation.The key is coordinating taxes, withdrawals, and benefits in a way so your money works in step with the life you’ve built here.

Download the Retiree’s Timing Guide to Social Security & Medicare

Learn how to align income, health coverage, and tax considerations in retirement.

Download The Guide

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Disclosures:

Securities and Advisory Services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.

This material is for informational purposes only and is not intended to provide specific tax, legal, or investment advice. Past performance is no guarantee of future results. All investing involves risk, including loss of principal.

No strategy ensures success or protects against loss. Please consult qualified tax, legal, and financial professionals regarding your individual circumstances.

Sources: IRS Publication 590-B (2024); Social Security Administration; FINRA Investor Education; Morningstar Research; U.S. Bureau of Labor Statistics.

Sources:

• IRS Publication 590-B (2024): Distributions from Individual Retirement Arrangements (IRAs)

• Social Security Administration: Retirement Benefits Estimator, ssa.gov

• FINRA Investor Education: Managing Retirement Income

• Morningstar Research: The State of Retirement Income, 2024 Edition

• U.S. Bureau of Labor Statistics: Consumer Expenditure Survey, 2024