What Is My Retirement Income Gap?
Work out the monthly shortfall between what you must spend and the income that already arrives whatever happens. That gap is the only sound reason to consider guaranteed income — and knowing it stops you buying more than you need.
Annuities get sold on fear of running out of money, which is a real fear and a terrible basis for a decision. The useful question is narrower and answerable: each month, how much must you spend on things that cannot wait, and how much income arrives regardless of what markets do?
The difference is your income gap. If it is zero, your essentials are already covered by Social Security and any pension, and the case for buying guaranteed income is weak no matter how the conversation is framed. If it is meaningful, you now know the size of the problem, and you can decide deliberately how much of it to cover.
The usual mistake is annuitizing far more than the gap, which trades away flexibility you will want for certainty you did not need. Work out the number first.
Your monthly figures
Monthly amounts, and only the essentials. Travel, gifts and the discretionary half of life deliberately do not belong here — those are what the rest of your money is for.
Prefer to work it out yourself?
The calculator above needs JavaScript. The arithmetic is not complicated — here it is, so you can do it on paper and skip us entirely if you want to.
- Add up what you must spend in a month: housing, utilities and food, health care, transport, and anything else that genuinely cannot stop.
- Leave out travel, gifts, hobbies and everything else discretionary. Those are what the rest of your money is for.
- Add up the income that arrives every month regardless: Social Security, any pension, any annuity already paying.
- Do not count withdrawals from an investment account. Those are not guaranteed, and counting them defeats the purpose of the exercise.
- Subtract the guaranteed income from the essential spending.
- What is left is your monthly gap. If it is zero or negative, your essentials are already covered.
Questions about this number
Why only essential expenses?
Because the point of guaranteed income is to make sure the things that cannot stop never depend on what markets did last year. Everything discretionary can flex in a bad year, and covering it with a guarantee means paying for certainty you do not need and giving up access to money you might want. Cover the floor, invest the rest.
Should I count withdrawals from my retirement accounts?
No, and this is the most common way people talk themselves out of a gap that is real. Withdrawals from an invested account are not guaranteed income — their sustainability depends on returns, on sequence of returns and on how long you live, which is precisely the uncertainty you would be trying to remove. Count only income that arrives whatever happens.
My gap is zero. Does that mean annuities are pointless for me?
It means the strongest argument for one does not apply to you, which is worth knowing before anybody makes a different argument. There can still be reasons — tax deferral on money you will not need, or wanting a larger floor than your essentials alone. But if somebody is selling you guaranteed income for a gap you do not have, ask them to show you the gap.
Does this tell me what the annuity would cost?
No, deliberately. What it takes to buy a given monthly income depends on your age, the payout shape, interest rates on the day and the company, and those move constantly. Any figure published here would be stale within days. This works out the gap; we quote current numbers against your actual details.
Send this to a licensed agent
Your monthly gap goes with it. A licensed agent calls back, usually the same business day, and will tell you plainly if your essentials are already covered.
Read next
Immediate Annuities · Deferred Income Annuities · Lifetime Income Riders — and the two numbers not to confuse.