How an Income Floor May Help Make Your Money Last in Retirement
After years of building retirement savings, spending that money can feel harder than expected.
You may wonder how much you can safely withdraw, what happens if the market drops or whether your money will last throughout retirement.
An income floor can help by covering essential expenses with reliable income that may last for life. Once those must-pay bills are covered, the rest of your retirement savings may have more flexibility to support growth, liquidity, legacy goals, or to fund the experiences you want to enjoy.
What is an income floor?
An income floor is the amount of dependable monthly income needed to cover most essential expenses in retirement.
Typical expenses include:
- Housing
- Utilities
- Groceries
- Health care
- Insurance
- Transportation
- Basic household needs
In other words, it helps you answer one of the most important retirement questions first: What income do I need each month before I start using the rest of my savings for other goals?
Your income floor may include Social Security, pension income, or income from an annuity. For many retirees, Social Security provides part of that monthly foundation. As of April 2026, the average monthly Social Security benefit for retired workers was $2,081.16.¹
However, Social Security may not be enough to cover all essential expenses. If your fixed bills are higher than your reliable monthly income, an annuity may help fill that gap by creating additional income designed to last for life, depending on the terms of the contract.
Why retirement spending can feel uncertain
Retirement changes the way you think about your money.
During your working years, the focus is usually on saving, investing, and building your balance. Once you retire, the goal becomes very different:
How do I spend what I've saved without running out?
That can be hard to answer because many retirees are responsible for creating their own retirement paycheck.
In the past, more workers had access to pensions. A pension is often called a defined benefit plan because the benefit is defined in advance. Retirees typically knew they would receive a set monthly payment, often for life.
A 401(k) works differently. It is a defined contribution plan. The amount going into the account may be defined, but the income coming out is not.
A 401(k) can help you save for retirement, but it does not automatically tell you how much income to take each month or how long your savings will last.
Today, fewer private industry workers have access to pension-style income. In March 2025, only 14% of them had access to a defined benefit pension, while 70% were able to contribute to a defined contribution plan through their employers, such as a 401(k).²
That means many retirees must make their own decisions about how to turn retirement savings into income.
How an income floor may help your money last
An income floor helps cover essential expenses with income you can count on.
For many retirees, that starts with Social Security or pension income. But if those sources do not cover all necessary monthly costs, you may choose to use a portion of your retirement savings to purchase an annuity that can provide additional income designed to last for life.
That can help answer one of the biggest questions in retirement:
How can I be certain my basic expenses are covered each month?
When essential expenses are covered by reliable income, you may feel less pressure to withdraw from market-based accounts just to pay everyday bills. Other retirement assets may then be managed for different goals, such as:
-
Growth potential
-
Emergency savings or liquidity
-
Travel and lifestyle goals
-
Legacy planning
-
Discretionary spending
The goal is not necessarily to use all of your retirement savings to buy an annuity. The goal is to determine whether a portion of those funds could be used to create dependable income for the expenses that must be paid.
How an annuity can help create an income floor
If Social Security or pension income does not cover your essential expenses, an annuity may help close the gap.
By using a portion of your retirement savings to purchase an annuity, you can create an additional source of predictable income. Depending on the type of annuity and contract terms, that income may be guaranteed* to last for life.
A fixed indexed annuity may also offer principal protection from market losses, along with growth potential tied to the performance of a market index. With an optional income rider for an additional premium, it may provide lifetime income that can help cover the bills that must be paid every month.
If you’re wondering how you can make your money last, this can be valuable: using part of what you’ve saved to create income designed to continue as long as you live.
What retirement risks can an income floor help address?
An income floor may help reduce the pressure created by several common retirement risks.
Market volatility
When retirement income depends heavily on investments, market downturns can create difficult decisions.
You may need money for everyday expenses at the same time account values are down. That can make it harder to know whether to sell investments, reduce spending, or delay plans.
An income floor can help cover essential expenses with reliable income sources such as Social Security, pensions, or annuities. This may reduce the need to rely entirely on market-based accounts for basic monthly costs.
Longevity risk
Retirement may last 20, 30, or more years.
The longer retirement lasts, the harder it can be to know how much you can safely use each month. Guaranteed lifetime income can help address the concern of outliving savings by providing income designed to continue for life.
Rising costs
Inflation, health care costs, and housing expenses can affect financial confidence in retirement.
The 2026 EBRI/Greenwald Retirement Confidence Survey found that 2 in 5 retirees said their overall retirement expenses were higher than expected.³
An income floor may not eliminate the impact of rising costs. However, it can help create a more stable foundation for stable retirement expenses. In some cases, income from an annuity rider may increase each year, depending on the product and contract terms.
Withdrawal uncertainty
Many retirees want to enjoy retirement but don’t want to use too much too soon.
AARP research found that 1 in 5 Americans age 50 and older are concerned about running low on money in retirement.⁴ A separate Annuity.org survey found that 62% of pre-retirees and retirees want guaranteed income.⁵
When essential expenses are covered by dependable income, it may be easier to use the rest of your savings with more clarity and less second-guessing.
A stronger retirement income strategy starts with the basics
Making your money last in retirement starts with knowing what your money needs to do.
Begin by identifying your essential monthly expenses. Then compare that amount to the reliable income sources you already have, such as Social Security, pensions, or other dependable income.
If there’s a gap, talk with your financial professional about whether an annuity may help create additional lifetime income for essential expenses.
With a reliable income foundation in place, you may feel more prepared to use your retirement funds for the life you worked hard to build.
*Guarantees rely on the financial strength and claims-paying ability of the issuing insurer.
1 Monthly Statistical Snapshot, April 2026
4 AARP Financial Security Trends Survey, January 2025
5 What Retirees Want From Financial Providers in 2025 | Annuity.org Survey
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