Your retirement income gap is the difference between the monthly income you need in retirement and the guaranteed income you can count on, such as Social Security or a pension. To find it, add up your monthly expenses, subtract your guaranteed income, and the remainder is the gap your savings will need to fill.
Step 1: Estimate what you'll spend each month
Start with essentials: housing, food, utilities, insurance, transportation and healthcare. Then list the extras that make retirement enjoyable, like travel, hobbies and gifts. Keeping the two lists separate helps later.
Step 2: Add up your guaranteed income
Guaranteed income is money that arrives every month no matter what the markets do: Social Security, a pension, or income from an annuity you already own. Your Social Security estimate is available in your my Social Security account at ssa.gov.
Step 3: Subtract to find your gap
Monthly expenses − guaranteed income = your monthly income gap.
Hypothetical example: a couple needs $5,000 a month for essentials and expects $3,200 a month from Social Security. Their essential income gap is $1,800 a month. Their savings, work income or other sources will need to cover that, plus any extras.
Ways people fill the gap
- Withdrawals from savings. Flexible, but the money can run short if markets fall or you live a long time.
- Working longer or part-time. Even a few years can reduce how much your savings must provide.
- Delaying Social Security. For people at full retirement age, benefits grow for each year you wait, up to age 70.
- Creating your own pension. An income annuity can turn part of your savings into a monthly paycheck for life. Here's how it works.
Cover the essentials first
Many retirees aim to cover essential expenses with guaranteed income, so the bills are paid no matter what, and use investments for the extras. Knowing your gap is the first step toward deciding how to do that.
Get help with your numbers
Try the income calculator on our home page, or book a Roadmap Call and Stina will help you map your gap and the options for filling it.
Related reading: Social Security and Annuities: How to Build a Retirement Income Floor
Questions people ask
What is a good retirement income gap to have?
There is no "good" number. What matters is having a plan for how each dollar of the gap will be covered, and how long your savings need to last.
Does Social Security count as guaranteed income?
Yes. Social Security pays a monthly benefit for life and includes cost-of-living adjustments, which makes it the foundation of most retirement income plans.
How can I close my retirement income gap?
Common options include withdrawals from savings, working longer, delaying Social Security, and using part of your savings to create lifetime income with an income annuity.
Free download: The Retirement Income Cheat Sheet. Find your income gap in 4 steps, plus 8 questions to ask before buying any annuity.
This article is general education, not individualized financial, tax or legal advice. Examples are hypothetical. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company, and annuities have fees, limitations and surrender periods that vary by product.