How an Income Floor Can Help Support Retirement Spending
An income floor can help make retirement spending feel more manageable by covering essential expenses with reliable income sources. This can give you more flexibility with the rest of your saved retirement funds, whether you want to keep money invested for growth, maintain access to cash, leave a legacy, or enjoy the retirement you worked for.
What is an income floor?
An income floor is the minimum amount of dependable income needed to cover your essential monthly expenses in retirement.
These are the bills that need to be paid no matter what, such as:
- Housing
- Utilities
- Groceries
- Health care
- Insurance
- Transportation
- Basic household needs
Think of an income floor as the foundation of your retirement income strategy. The goal is to cover your basic expenses with income you can count on.
For many retirees, Social Security is the starting point. As of April 2026, the average monthly Social Security benefit for retired workers was $2,081.16, according to the Social Security Administration.1
But Social Security alone may not cover all essential expenses. If there is a gap between your reliable monthly income and the bills you need to pay, an annuity may be one way to help fill it.
Why retirees may need an income floor
The shift from saving to spending can feel uncomfortable for some retirees.
After decades of building a retirement balance, watching that balance shrink can be unsettling — even when the money is being used exactly as intended. The question becomes: How much can I spend without putting my future at risk?
For previous generations, pensions helped make that question easier to answer. A pension is often called a defined benefit plan because the benefit is defined in advance. In other words, retirees knew they would receive a set monthly payment in retirement, often for life.
A 401(k) works differently. It is a defined contribution plan, which means the amount contributed to the account may be defined, but the income coming out is not. A 401(k) helps you save for retirement, but it does not automatically tell you how much income you can safely take each month or how long your savings will last.
That responsibility often falls on the retiree.
Today, fewer workers have access to pension-style income. In March 2025, only 14% of private industry workers had access to a defined benefit pension, while 70% could contribute to a defined contribution plan such as a 401(k).2
That means many retirees are relying more heavily on retirement account balances they manage and draw from over time.
And that can bring up a common question on retirees’ minds:
Will my money last?
Many aren’t so sure.
The 2026 EBRI/Greenwald Retirement Confidence Survey found that only 64% of Americans feel confident they have enough money to live comfortably throughout retirement, down from the year before.3
-
How much can I safely withdraw?
-
What if the market drops?
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What if inflation stays high?
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What if health care costs more than planned?
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What if I live longer than expected?
An income floor helps by creating a base of reliable income for the recurring expenses. Instead of trying to determine withdrawals from retirement savings, retirees can use Social Security, pensions, and annuities to help cover essential costs with these fixed income sources.
How can an annuity help build an income floor?
An annuity can help turn a portion of retirement savings into predictable income.
For some people, a fixed indexed annuity with an optional income rider, for an additional premium may provide guaranteed lifetime income, depending on the terms of the contract. A fixed indexed annuity can also help protect principal from market losses while offering growth potential tied to the performance of a market index.
Typically, the idea is not to pull all retirement funds into an annuity. Instead, the goal may be to use a portion of your portfolio to ensure your basic expenses are covered by this guaranteed* income.
What risks may be reduced by an income floor?
An income floor can help reduce the pressure created by several common retirement risks.
Market volatility
When retirement income depends heavily on investments, market drops can create added pressure. You may need to sell investments to pay bills when values are down.
An income floor can help cover essential costs with reliable income sources, such as Social Security, pensions, or annuities, so you are not relying entirely on taking withdrawals from market-based accounts to cover your basic needs.
Longevity risk
You may spend 20, 30, or more years in retirement. The longer retirement lasts, the harder it can be to know how much is safe to spend.
Guaranteed* lifetime income can help address the fear of running low on savings by providing income designed to continue for life.
Inflation and rising costs
The 2026 EBRI survey found that inflation, health care costs, and housing expenses continue to weigh on retirement confidence. Two in five retirees said their overall retirement expenses have been higher than expected.3
While an income floor may not eliminate the impact of rising costs, it can help cover fixed costs in retirement. And an annuity rider may increase your income each year, helping offset inflation to some degree.
Spending confidence
AARP research found that 1 in 5 Americans 50 and older are concerned about running low on money in retirement.4 While a survey from Annuity.org found 62% of pre-retirees and retirees want guaranteed income.5
Knowing your essential expenses are covered may help make retirement spending feel more manageable.
In conclusion: an income floor can help support the lifestyle you want in retirement
Start by identifying your essential monthly expenses. Then compare those costs to the reliable income sources you already have, such as Social Security, pensions, or other dependable income.
If there is a gap, talk to your financial professional about whether an annuity could help. An annuity may provide additional income you can count on to help cover fixed retirement expenses.
*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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