Lifetime Income Solutions for Retirees

Investment portfolios as flexible income

Many retirees rely on investment portfolios to support retirement spending and longer-term goals.[1] While these assets do not provide guaranteed payments, they may play an important role in creating a well-balanced retirement income plan.

• Provide flexible income: Portfolios can generate cash flow through dividends, interest, and planned withdrawals that can be adjusted as needs, markets, and priorities change.
• Help address inflation risk: Because portfolios typically include growth-oriented investments, they offer the potential to keep pace with rising costs over a long retirement.
• Support discretionary goals: Investment-based income could be well-suited for travel, hobbies, charitable giving, and legacy planning—expenses that are less predictable and don’t require guarantees.
• Complement guaranteed income: When essential expenses are covered by Social Security, pensions, or lifetime-income solutions, portfolios can be used more confidently and strategically for flexibility and opportunity.

Social Security as the foundation

When it comes to guaranteed income, Social Security is often the first and most dependable source of lifetime income. It provides inflation‑adjusted checks for life and should be the anchor of any retirement cash‑flow plan; the Social Security Administration set the 2026 cost‑of‑living adjustment (COLA) at 2.8%, which raises average monthly benefits and can be treated as the baseline for essential expenses such as housing and healthcare.[1]

Pensions and employer lifetime income options

Traditional pensions still exist for some retirees, but many employers now offer modern alternatives that blend the security of guaranteed income with the flexibility of account‑based savings.

Cash balance plans

Cash balance plans are a type of defined benefit plan that have grown rapidly in recent years, now representing a substantial share of the pension landscape. Unlike traditional pensions that promise a monthly benefit based on years of service, cash balance plans credit your account with a set percentage of pay plus interest. This creates a pension‑style benefit with clearer, portable account balances that can be converted into lifetime income at retirement.[2]

• Cash balance plans now represent a substantial share of defined‑benefit activity. They give employees the reassurance of a pension‑style benefit but with more transparency and flexibility than traditional pensions.
• If you have access to a cash balance plan, it can serve as a reliable foundation for retirement income, complementing Social Security and personal savings.

In‑plan lifetime income features in 401(k)s

Many employers are adding options inside their 401(k) plans that may allow participants to turn part of their savings into steady payouts without rolling funds into an outside annuity. These features may include annuity “windows,” managed payout programs, or guaranteed income riders.[3]

• In‑plan lifetime income features in 401(k)s help participants create paycheck‑style income directly from workplace savings, making the transition from accumulation to distribution smoother.
• If your employer offers these features, you can build a retirement paycheck within your 401(k), potentially at a lower cost and with simpler administration than buying an annuity product on your own.
• If you have a pension or an employer plan with lifetime‑income options, consider those guaranteed payments when building your monthly budget.

Other lifetime income tools to consider

Beyond Social Security and employer plans, there are targeted products designed to add guaranteed income or reduce the risk of outliving your savings. These are often called deferred income products, because you choose a future date when the payments begin. They can be useful if you want income to start later in retirement, when expenses may rise or other sources of cash flow taper off.

Qualified Longevity Annuity Contracts (QLACs)

A QLAC allows you to set aside a portion of your IRA or 401(k) savings to begin paying out at a later age—often 80 or 85. This strategy helps cover very late‑life expenses and can reduce required minimum distributions (RMDs) in the meantime, since the assets inside the QLAC are excluded from RMD calculations until payouts begin. [1]

• QLACs are a way to insure against longevity risk, helping to ensure you still have guaranteed income if you live well into your 80s or 90s.
• If you’re concerned about outliving your assets, a QLAC can serve as a “backstop” for later years while giving tax relief in the near term.

Annuities

Annuities are contracts with insurance companies that can provide lifetime payments, either starting immediately or at a future date. They offer some level of comfort by creating a predictable paycheck, but they also come with tradeoffs such as fees, reduced liquidity, and contract complexity. When you incorporate annuities into your retirement income planning, you’ll need to be comfortable with turning over a portion of your portfolio to the annuity provider in exchange for guaranteed income.

• For some retirees, the psychological benefit of knowing a check will arrive every month may outweigh the downsides.
• Treat annuities as one option among many. They can be valuable when guarantees clearly outweigh the loss of flexibility, but they should be evaluated carefully against your broader retirement plan and legacy goals.

Tax and policy changes that affect income planning

Recent rule changes reshape how retirees and late‑career workers save and withdraw money. Understanding these updates can help you make smarter decisions about contributions, withdrawals, and tax exposure.

Higher contribution limits for 2026

The IRS increased retirement plan contribution limits, giving you more room to build tax‑advantaged savings. For example, the 401(k) elective deferral limit rose for 2026, and IRA limits also increased. [2]

• Why this matters: Larger limits mean you can set aside more money in accounts that grow tax‑deferred or tax‑free, which strengthens your ability to create dependable lifetime income.
• Takeaway: If you’re still working, review your contribution levels and consider increasing them to take advantage of the higher caps.

SECURE 2.0 Roth catch‑up rules

Beginning in 2026, certain higher‑income earners must make catch‑up contributions on a Roth (after‑tax) basis. This may shift the tax profile of late‑career savings, since Roth contributions are taxed now but grow tax‑free for future withdrawals. [3]

• The change may affect how you plan distributions in retirement. Roth contributions can reduce taxable income later, which may help protect benefits like Medicare and Social Security that are sensitive to income levels.
• If you’re in the higher‑income bracket, plan ahead for this shift. It may be wise to adjust your savings strategy now so you’re ready when the rule takes effect.

Healthcare and essential expense planning

Healthcare costs are a major retirement expense that may be supported by reliable income. Using guaranteed sources to pay Medicare premiums, supplemental insurance, and predictable medical costs may allow you to keep liquid savings available for unexpected health needs.

A simple planning framework

• Consider covering essentials with guaranteed income: Social Security, pensions, and employer lifetime options can often fund housing, healthcare, and insurance.
• Use targeted products for gaps: QLACs or deferred income can protect against very late‑life expenses.
• Manage taxes proactively: Coordinate Roth conversions, catch‑up contributions, and withdrawal timing to smooth taxable income.
• Keep a flexible bucket: Maintain liquid assets for emergencies, one‑time goals, and legacy planning.
• Review existing contracts: If you already own an annuity or pension, review the terms and integrate them into your overall cash‑flow plan.

Summary

Retirees may have a number of ways to build dependable income. Social Security and employer solutions remain central, while QLACs, market‑style pension designs, and targeted lifetime‑income products provide additional choices. Annuities can be useful in the right circumstances, but they are only one tool among many.

The strongest retirement plans often blend guaranteed income for essentials—such as housing, healthcare, and insurance—with flexible portfolio income for discretionary goals and inflation protection. Investment portfolios can play a critical role in supporting travel, hobbies, charitable giving, and legacy planning, while offering growth potential to keep pace with rising costs. When essentials are covered by guaranteed sources, portfolios can often be used more confidently and strategically for flexibility and opportunity.

Every retiree’s situation is unique. If you have questions about how to balance guaranteed and flexible income sources—or how recent tax and policy changes affect your plan—contact your advisor. They can help you evaluate the right mix for your goals and help ensure your retirement income strategy is built to last.