Every day, about 11,400 Americans turn 65, marking the start of what should be a well-earned period of financial comfort. Yet for many, retirement brings more anxiety than relaxation. With traditional pensions largely a thing of the past and Social Security covering only part of the bill, ensuring dependable income throughout retirement has become a growing concern. That’s where protected income comes in.
What Is Protected Income?
Protected income refers to a stream of money retirees can count on for life—regardless of how long they live or how markets perform. This kind of income usually arrives on a set schedule in payments and can come from sources such as Social Security, pensions, or annuities. The goal is to replace part of the paycheck that disappears once someone stops working, helping retirees maintain their standard of living and cover essential expenses.
Why It Matters Now More Than Ever
Decades ago, many workers retired with company pensions that paid guaranteed income for life. But today, only about 4% of the private-sector workforce still has access to such traditional pensions. The responsibility for creating reliable income has largely shifted from employers to individuals.
Meanwhile, Social Security—while essential—only goes so far. On average, it replaces about 40% of a worker’s pre-retirement income, far below what most retirees need to maintain their lifestyles. Financial experts typically suggest aiming for 70% to 80% of pre-retirement income to comfortably sustain expenses. That leaves a substantial gap that must be filled through personal savings and other income sources.
Unfortunately, many retirees are finding their nest eggs aren’t stretching as far as they hoped. According to recent surveys, one in three retirees say they’re spending their savings faster than expected. With longer life expectancies, rising healthcare costs, and inflation eroding purchasing power, running out of money is one of retirees’ top fears.
Annuities: A Tool for Protected Income
One effective way to create protected income is through annuities—insurance contracts designed to provide steady payments for a specified period or for life. When purchased from a reputable insurer, annuities can convert a lump sum of savings into guaranteed monthly income, offering protection from market downturns and longevity risk (the risk of outliving your assets).
There are several types of annuities, including immediate annuities that begin paying right away and deferred annuities that start later, often when other income sources decline. Some annuities also offer inflation protection or spousal continuation benefits, ensuring income stability even in changing circumstances.
While annuities are not one-size-fits-all and come with costs and conditions, they can serve as a valuable foundation for retirees who want to ensure that at least part of their income is protected and predictable.
Building Financial Security for the Long Term
For retirees seeking financial confidence, a balanced strategy may include a mix of protected income and market-based investments. The protected portion—often created through Social Security, pensions (if available), or annuities—covers essential expenses like housing, healthcare, and food. The remainder can stay invested for growth and flexibility.
As America’s aging population continues to grow, understanding and creating protected income will be key to ensuring retirement security. After all, while savings can run out, protected income is built to last a lifetime.
Talk with us about some income options that may fit with your retirement needs.
Annuities are long-term investments designed for retirement purposes. Withdrawals of taxable amounts are subject to income tax and, if taken prior to age 59½, a 10% federal tax penalty may apply. Early withdrawals may be subject to withdrawal charges. Optional riders are available at an additional cost. All guarantees are contingent on the financial strength of the issuing company.