Most retirees focus on a lump-sum savings number. A better question: how much guaranteed monthly income do I still need after Social Security and pensions? That gap is what an annuity is designed to fill. Run the numbers below.
Retirement Income Gap Calculator
Find out how much guaranteed income you still need - and the lump sum required to fill the gap with a SPIA.
Income Gap Analysis
| Annual gap | |
| SPIA premium needed to close gap | |
| Lump sum needed at 4% withdrawal rule |
SPIA estimate uses 2026 average payout factors. The 4% rule assumes a balanced portfolio and 30-year horizon. A SPIA fills the gap with less capital because it pools longevity risk.
Why the Income Gap Matters More Than the Lump Sum
Retirement spending is monthly, not annual. Your bills, groceries, and Medicare premiums hit on a monthly cycle. If your monthly fixed income (Social Security + pension) is less than your monthly fixed expenses, you have a gap that must be filled by either drawing down savings or by guaranteed income from a Single Premium Immediate Annuity (SPIA), Deferred Income Annuity (DIA), or income rider on a fixed indexed annuity.
How Much Does It Take to Fill a Gap?
The calculator shows two answers: the SPIA premium needed and the lump sum needed under the 4% rule. The SPIA almost always requires less capital because it pools longevity risk – the carrier can pay a higher rate because it pays for life and stops at death. The 4% rule has to assume you might live to 95.
Example: a 65-year-old male needing $2,000/month of additional income would need roughly:
- ~$352,000 via the 4% rule
- ~$295,000 via a single-life SPIA
The SPIA wins by ~$57,000 of capital that stays in your investment portfolio for growth, emergencies, or legacy.
What’s Not in the Calculator
- Inflation. A level SPIA doesn’t grow. To match inflation, you can either ladder SPIAs over time or buy a SPIA with a 2-3% COLA rider (which lowers initial payout).
- Healthcare cost growth. Medicare premiums and out-of-pocket costs typically rise 5-7% per year, faster than general inflation.
- Tax treatment. Non-qualified SPIAs use the exclusion ratio; IRA-funded SPIAs are 100% taxable as ordinary income.
- Surviving spouse. A joint-and-survivor SPIA pays slightly less but continues for two lives.
Frequently Asked Questions
What’s the difference between this and the 4% rule?
The 4% rule withdraws from a portfolio. A SPIA is a contract: you give the carrier a lump sum, they pay you a guaranteed amount for life. The portfolio approach gives you flexibility and growth potential. The annuity approach gives you certainty and uses less capital.
Should I cover 100% of my expenses with annuities?
No. The standard advice: cover essential expenses (housing, food, healthcare, utilities) with guaranteed income (Social Security, pension, annuity). Use the rest of your portfolio for discretionary spending and growth.
Is a SPIA the only way to close the gap?
No. Income riders on fixed indexed annuities can also produce lifetime income. A SPIA usually pays more income per dollar but offers no upside. A FIA with income rider pays less but has growth potential and a death benefit.
