Plan for Tomorrow | Ways to fill income gaps after retirement
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Ways to fill income gaps after retirement

Oct 9, 2023, 3:35:40 PM | Reading Time: 6 minutes

When thinking about retirement, many people might not feel that they are financially prepared to live their lives fully. Less than two-thirds of American workers feel confident in having enough money to live comfortably throughout their retirement. Many factors can affect retirement readiness, from market volatility and inflation to longevity and increasing medical costs. Thankfully, those gaps can be filled in several ways.

Ways to fill income gaps after retirement

What is the retirement income gap?

Retirement income gaps can happen when there is a difference between retirement income and actual expenses. Making an accurate estimate for the future can feel challenging. Still, by reviewing goals and using a budget, one can determine how much they’ll need to cover planned and unexpected expenses. If there are income gaps as retirement nears, don't panic. It's never too late to increase savings, decrease spending, and continue to bring in money after retirement.

Creating income streams for retirement

A solid retirement plan's main focus is ensuring enough income to meet goals and enjoy the desired lifestyle as a retiree. If income gaps are discovered, or an individual wants to proactively prevent them from happening, there are ways to generate income streams for the future potentially. If income comes from Social Security, pensions, and retirement savings accounts, this can be supplemented with other savings solutions, like annuities, bonds, and certificates of deposit (CD). Even if retirement planning is delayed, there are still options that will allow you to build passive income for the future.

Passive income in retirement

Creating a diversified retirement portfolio that includes sources of money not earned from active work — called passive income — can help grow savings and be better prepared for planned and unexpected expenses. Some examples of passive income are CDs, bonds, annuities, rental properties, and high-yield savings accounts. Options like CDs and bonds are investments that can be capitalized on at any time, whereas annuities are commonly designed if one is nearing retirement age.

Only 2/3 of Americans feel confident their income will last in retirement

How do you get income from an annuity?

An annuity typically allows a policy owner the option to choose between a lump sum payment or through scheduled payments. Policy owners can then exchange these payments for guaranteed cash flow in retirement, whether monthly, quarterly, semi-annual, or annual. Some annuities can also provide guaranteed income for the rest of your life.

Depending on the type of annuity chosen, interest may be earned, which can further build savings. The policy owner can also select when their income will begin, whether it’s right away or at a later date. Including an annuity in a retirement income plan can help individuals avoid outliving their money and bring growth potential and protection to retirement assets.

How to balance out spending in retirement

Even with a solid income plan and additional cash flow, it’s a good idea to keep spending in balance with income throughout retirement. Spending habits may need to be adjusted to help ensure income can support a desired lifestyle without racking up debt or depleting savings. Here are helpful ways that can cut costs in retirement:

  1. Stick to a budget and keep track of purchases
  2. Avoid impulse buys
  3. Limit dining out or food delivery
  4. Take advantage of senior discounts
  5. Downsize your home
  6. Shop around for better rates on car and home insurance, internet, and phone services
  7. Sell vehicles and transition to a one-car household

How much can I spend in retirement?

Depending on lifestyle, health care costs, and other goals, retirement spending should match the financial situation. On average, retirees spend between 55% and 80% of their annual income that they earned while working throughout their retirement years. Remember that medical events or other emergencies can lead to higher spending. Building flexibility into a retirement income plan can help financially prep for the unexpected while also allowing for adjustments to spending as needs and lifestyle changes.

Some retirement income strategies that can maximize earnings

Supporting a desired lifestyle in retirement takes proper planning and building a strategy unique to an individual and their financial situation. As near-retirees work hard to save for the future, they likely want to find ways to make the most of those earnings. Here are several ideas that can help maximize income during retirement:

Create lifetime retirement income

Including sources of guaranteed income in a retirement plan, like a pension or an annuity, can boost financial security and help create more security for the future. Certain annuities provide guaranteed lifetime income that will give a “retirement paycheck” the policy owners can count on for the rest of their lives.

Boost retirement contributions

Many people have retirement savings plans through work or accounts they've set up alone. It's a good idea for those accounts to consider contributing the maximum amount possible. Plus, if an employer offers a company match, there is an opportunity to increase savings.

Make catch-up contributions

Once an individual turns 50, they may become eligible to make catch-up contributions to their 401(k) and IRA. This offers an opportunity to boost those retirement savings, especially if their account balances are not where they want them to be.

Consider systematic withdrawals

It's common for retirement savings accounts to have different withdrawal rules. When considering an income plan for retirement, it can be beneficial to increase withdrawals periodically to account for inflation. Account holders may want to consider a systemic withdrawal strategy where a certain percentage is removed from retirement savings, an annuity per year, or another established timeframe. Making systematic withdrawals allows the funds not being used to keep growing.

Control taxable income in retirement

Just like it's beneficial to diversify a retirement portfolio, it can be a good idea to vary how and when savings will be taxed. Various retirement accounts have different taxation rules, and individuals may be able to manage these accounts better to control taxable income in retirement.

Many people may have gaps in their financial plan or release as they near retirement they need to bulk up their savings to live comfortably. It's a good idea to meet with a financial professional who can help review individual needs and explore options to create income to help build a more secure retirement.

As you build your retirement plan and save for the future, it’s never too late to find ways to close an income gap and ensure you have the money you need to achieve your goals. Meeting with a financial professional along the way can help you explore your specific needs and determine which financial moves will get you on the right track toward a more secure retirement.


Neither North American, nor any financial professionals acting on its behalf, should be viewed as providing legal, tax or investment advice. Please rely on your own qualified tax professional.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.