Many retirees find that their monthly expenses exceed their Social Security benefits, creating an income gap that must be covered by drawing down savings. In fact, a report from the National Institute on Retirement Security found that 40 percent of older Americans rely solely on Social Security for retirement income—a precarious situation given that Social Security was never intended to replace all pre-retirement earnings and typically covers only around 40 percent of those earnings. Without an additional guaranteed income stream, even modest shortfalls can chip away at nest eggs over time, leaving retirees vulnerable to market swings and longevity risk.

While a small monthly gap might not seem alarming in one’s mid-60s, the cumulative effect over 10, 15, or 20 years can be significant. The conventional “4 percent rule” suggests retirees need to have saved roughly 25 times the annual shortfall beyond Social Security to maintain a sustainable withdrawal rate. For example, if you face a $40,000 annual gap, you’d ideally need at least $1 million in retirement assets to safely cover it without exhausting your portfolio prematurely. Failing to plan for these deficits can force difficult trade-offs, such as cutting essential spending or taking greater investment risks late in life.

The risk intensifies dramatically when a spouse passes away. At that point, one Social Security benefit goes away and the surviving spouse often loses the accompanying income tax deduction, all while inflation continues to erode purchasing power. According to Urban Institute projections, if the Social Security trust funds were depleted by 2045, median incomes for adults 62 and older could fall by 14 percent, pushing an additional 3.8 million people into poverty. This so-called “Income Cliff” can turn a manageable shortfall into a crisis for widows and widowers, who suddenly face a much steeper financial mountain alone.

Research shows that these income vulnerabilities are widespread: a recent analysis by the National Council on Aging found that 80 percent of older adults are either financially struggling now or at risk of falling into economic insecurity as they age. Given these stark realities, many retirees wish to lock in predictable, lifelong income to cover essential expenses, protect against market downturns, and ensure peace of mind—no matter how long they live or what unexpected events occur.

One effective way to achieve this is by building your own personal pension through an income annuity. Annuities allow you to convert a lump sum of savings into guaranteed monthly payments for life, shielding you from market volatility and longevity risk. As financial experts note, incorporating guaranteed income products like annuities into a comprehensive retirement plan can be a critical element in preventing savings depletion and securing a stable retirement cash flow. With the right strategy, you can count on a steady income stream to cover your needs, freeing you to enjoy retirement without worrying about outliving your resources.