By Rachel Christian, Bankrate.com
If you’re serious about financial security in retirement, you can’t rely on Social Security alone.
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For most people, those checks cover only a fraction of their living expenses. According to the Social Security Administration, the average monthly benefit for retired workers as of July 2025 was about $2,000 a month. That barely covers rent in many cities, let alone food, health care and everything else you’ll need over decades in retirement.
The pension era is also over for most workers. Outside of government jobs, pensions have largely disappeared as companies shifted the onus of saving for retirement to employees via 401(k)s and IRAs. According to the Bureau of Labor Statistics, only 15% of private industry (non-government) workers had access to a pension in 2023. So for most Americans, their retirement income largely depends on how well they save, invest and structure their own portfolio.
That means you’ll likely need to piece together multiple sources if you want to create lifetime income — money you can rely on every month, no matter how long you live.
“Combining a variety of income streams with differing levels of growth potential, flexibility and guarantees will provide a solid balance for most retirees,” says Stephen Kates, CFP and financial analyst for Bankrate.
Here are five ways to get on the path to lifetime income so you can sustain cash flow for the long haul.
1. Buy a single premium immediate annuity (SPIA)
A single-premium immediate annuity, or SPIA, is the most straightforward version of an annuity. You give an insurance company a lump sum — say $100,000 — and in return, the insurer guarantees you a fixed monthly check for the rest of your life. Payments usually begin within one year of signing the annuity contract.
What sets SPIAs apart is their simplicity. Unlike variable annuities, which tie payouts to the performance of mutual fund–like subaccounts, or indexed annuities, which use formulas linked to stock market indexes, SPIAs aren’t linked to the market.
Instead, the insurer calculates your payment based on age, interest rates and life expectancy. Once the contract is signed, you know exactly what you’ll receive each month. That predictability makes them function almost like a self-funded pension.
They also stand out on fees. With SPIAs, you won’t see itemized costs eating into your payments each month. Instead, the insurance company builds its margin into the payout up front. That’s a noteworthy departure from other annuities, especially variable annuities with income riders, which can carry annual fees of 2 or 3%.
The trade-off is that once you commit, the money is locked up. You can’t dip back into the lump sum for emergencies. That’s why some financial advisors use SPIAs to cover a client’s fixed monthly needs, like housing and utilities, while using withdrawals from retirement plans and other income for other expenses.
“If your existing guaranteed income (like Social Security) doesn’t cover all necessary expenses, an annuity can help fill the gap,” says Kates.
2. Consider a longevity annuity
A longevity annuity is designed for the later years of retirement. Instead of paying right away, payouts start at age 75, 80 or even 85, helping protect you from outliving your savings.
A longevity annuity is simply a type of deferred income annuity. You pay the insurer a lump sum now, and they promise fixed monthly checks in the future. Because the insurer invests your money longer, the funds have room to grow into bigger payouts. The longer you defer, the less you need to invest up front to secure meaningful lifetime income.
One popular version is the Qualified Longevity Annuity Contract, or QLAC. You fund a QLAC using money from a traditional IRA or 401(k), and you can delay required minimum distributions (RMDs) on the money used to fund it.
Normally, the IRS forces you to begin RMDs at age 73, even if you don’t need the cash. With a QLAC, you can shield up to $210,000 in 2025 from those withdrawals, cutting your taxable income in your 70s while setting yourself up with guaranteed income later. However, payments from a QLAC must begin no later than age 85.
Like SPIAs, longevity annuities are simple and straightforward compared to many other annuity products. You don’t have to wade through participation rates, index crediting formulas or optional riders with extra charges. Costs aren’t broken out in an annual fee statement, but like SPIAs, they’re built into the calculation of your future payments.
The trade-off, of course, is you might not live long enough to reach the payout age. And if you die before payments begin, the insurer keeps the money unless you’ve purchased a special rider at an added cost.
However, for those who expect to live longer than average, longevity annuities can deliver peace of mind at a relatively low cost.
3. Create a bond ladder
If you want income without locking money away in an annuity, a bond ladder is a helpful tool.
A bond ladder is a strategy in which you buy a series of bonds that mature at different times — such as one-year, three-year, five-year and 10-year Treasury bonds. As each bond matures, you collect the principal and can either reinvest the money or spend it.
The benefit of this setup is steady, predictable cash flow and reduced interest rate risk. Instead of putting everything into one long-term bond (and getting stuck with a low rate), you spread out maturities. That way, when rates rise, you can reinvest in new bonds with higher yields.
But building a bond ladder on your own can be confusing.
“DIY investors who are familiar with building CD ladders at their local bank may find bonds to be a more complex undertaking,” says Kates.
You’ll need to select the right mix of maturities, know how to buy Treasurys or corporate bonds, and manage rollover decisions. That’s why Kates says bringing in a financial advisor to structure and monitor the ladder can be a prudent move.
“Otherwise, sticking with CDs or bond ETFs may be a better option,” he says.
4. Invest in dividend stocks
Dividend-paying stocks are another vehicle retirees use to generate income. Shares of these companies regularly return a portion of profits to shareholders, often quarterly. For example, household names like Coca-Cola (KO) or Procter & Gamble (PG) have a long history of paying reliable dividends.
The advantage is twofold: You get regular cash flow and the potential for your stock value to increase over time.
But here’s the trade-off and the risk: Dividends aren’t guaranteed. Companies can slash or eliminate payouts at any time and for any reason.
Despite the risk, retirees often use dividend stocks to supplement their income. Purchasing a dividend stock ETF, which spreads your money across multiple companies and sectors, can help lower the risk of relying too heavily on one company’s payout. Some investors also focus on what are known as Dividend Aristocrats, or companies that have paid and raised their dividends for at least 25 straight years.
5. Own a rental property
Real estate is another classic income source for retirees. A rental property can provide monthly cash flow while also appreciating in value over time. In retirement, that steady income can feel like a second paycheck.
Of course, being a landlord isn’t for everyone. Dealing with repairs, tenant headaches and vacancies can be stressful. Property managers can take some of that hassle off your plate, but they also eat into profits. And unlike an annuity, rental income isn’t guaranteed — tenants might move out and unexpected costs can pile up.
Still, real estate is a tangible asset, which gives it a unique edge. Unlike other investments, property is something you can live in, pass down or sell if needed.
Bottom line
Everyone loves the idea of lifetime income, but it doesn’t happen on its own. You need a plan that blends different sources. Annuities are the only tool aside from Social Security that can guarantee income, making them an important consideration. But beyond that, bond ladders, dividend stocks and real estate can all play supporting roles. A good financial advisor can help you sort through these options, weigh the trade-offs and build a strategy that fits your needs.
Key takeaways
Social Security likely won’t cover all of your expenses in retirement, and the prevalence of pensions is dwindling. This leaves those planning for retirement to piece together how they will create lifetime income for themselves during their golden years.
Annuities are the only product that can provide guaranteed lifetime income, but other tools — like bonds, dividend stocks and real estate — can add stability and flexibility.
There’s no universal formula for creating lifetime income. The right approach depends on your risk tolerance, resources and retirement goals.
©2025 Bankrate.com. Distributed by Tribune Content Agency, LLC.
