How to Fill the Gaps in Your Retirement Income Plan

You’ve saved. You’ve planned. But one of the biggest retirement risks could still be hiding in your numbers:
An income gap.

This gap is the shortfall between what you’ll need each month to live comfortably and what you can count on from guaranteed income sources. It’s more common than people think—especially with inflation, longer lifespans, and uncertain markets.

During Retirement Readiness Month, now’s the perfect time to calculate your income gap and explore safe, reliable ways to fill it.

What Is a Retirement Income Gap?

Your retirement income gap is the difference between your monthly expenses and your guaranteed monthly income.

For example:

• You expect to spend $5,000/month in retirement.
• Social Security and a small pension give you $3,200/month.
• That leaves an income gap of $1,800/month that you’ll need to fill—for life.

Too often, retirees try to cover this gap with market-based withdrawals. But that approach leaves them vulnerable to volatility, poor timing, and longevity risk.

How to Know If You Have an Income Gap

Determining whether you have a retirement income gap is easier than it sounds. Here’s a simple process:

Step 1: Estimate Your Monthly Retirement Expenses

Make a list of your expected monthly costs, broken into two categories:

Essential Expenses

• Housing (mortgage or rent, taxes, insurance, upkeep)
• Utilities, groceries, transportation
• Medicare premiums, supplements, and out-of-pocket healthcare

Discretionary Expenses

• Travel, hobbies, dining out, entertainment
• Gifts, charitable giving, grandchildren expenses

➡ Total these to estimate your monthly retirement budget.

Step 2: Add Up Your Guaranteed Income

List any income sources you can rely on consistently each month, including:

• Social Security (get your estimate at ssa.gov)
• Pension payments
• Annuity income (from fixed, immediate, or indexed annuities)
• Rental income or structured payouts

➡ Add these up to find your total guaranteed monthly income.

Step 3: Subtract Guaranteed Income from Expenses

Now simply subtract:

Monthly Expenses – Guaranteed Income = Your Retirement Income Gap

Example:
If your total expenses are $5,000 and guaranteed income is $3,200, then:

$5,000 – $3,200 = $1,800/month income gap

This is the amount you need to fill with safe, reliable sources—ideally not dependent on the ups and downs of the stock market.

Why It Matters: The Real Risk of an Unfilled Gap

If you’re withdrawing from investments to cover a monthly shortfall, you could face:

• Market volatility that wipes out gains
• Sequence-of-returns risk, especially early in retirement
• Tax inefficiencies that drain your nest egg faster
• Longevity risk—you may live longer than your money

Instead of hoping the market cooperates, many retirees are turning to guaranteed income solutions that provide reliability, simplicity, and peace of mind.

Top Strategies to Fill Your Retirement Income Gap

Here’s a look at common options, including their pros and cons:

Annuities: A Personal Pension for Your Gap

Annuities—especially Fixed Indexed Annuities (FIAs)—are a powerful way to close retirement income gaps with guaranteed payments.

With an FIA, you can:

• Lock in income for life, starting now or later
• Avoid market losses while benefiting from index-linked growth
• Choose optional features like long-term care riders
• Reduce your reliance on investment withdrawals

You can even structure an annuity payout to start in a specific year—such as when you stop working or after delaying Social Security.

Bonus Strategy: Sequence Your Withdrawals Smartly

If you have a mix of IRAs, Roths, annuities, and brokerage accounts, don’t treat them separately. A coordinated withdrawal strategy can:

• Reduce taxes
• Extend the life of your portfolio
• Smooth out cash flow

For example:

• Use taxable accounts early to let tax-deferred assets keep growing
• Use annuity income to cover fixed needs
• Use Roth IRAs later for tax-free withdrawals

Planning for the Long Run

Your retirement income gap isn’t a one-year issue—it’s a 30+ year planning problem. That’s why it’s crucial to:

• Build in an inflation buffer
• Plan for a surviving spouse
• Cover potential health and care costs
• Use guaranteed income sources that last as long as you live

Don’t Let a Gap Undermine Your Retirement

The sooner you identify and address your income gap, the more secure your retirement will feel. It’s one of the most important steps you can take this month.

And you don’t have to do it alone.

Tip of the Month: Fixed Indexed Annuities can help fill your retirement income gap—without the risk of market loss.

Ready to Close the Gap?

July is Retirement Readiness Month. Now’s the time to review your plan, run the numbers, and take action.

Visit SafeMoney.com to explore retirement income strategies, or speak with a licensed specialist to get a personalized gap analysis.

🧑‍💼 Written by Brent Meyer, founder of SafeMoney.com. With more than 20 years of hands-on experience in annuities and retirement planning, Brent is committed to helping Americans make informed, confident financial decisions.

Disclaimer: This article offers general retirement planning tips and is not personal financial advice. Consult a licensed professional before making any decisions.