If I was 65 years old with no pension, what would I do? My first goal would be to create a reliable stream of income that I could not outlive. I would not want my retirement lifestyle to depend entirely on what the stock market happened to do that year.
That’s because although I am not 65 yet, when I reach that age, I will not have a traditional employer pension. My plan is to use annuity contracts to create my own pension while keeping part of my portfolio invested for future growth.
That approach may be especially useful for business owners, self-employed professionals, and anyone who spent their career saving through a Solo 401(k), other retirement accounts, investments, or the eventual sale of a business.
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1. I Would Start by Identifying My Guaranteed Income Gap
The first question I would ask is simple: How much dependable income will I already have at age 65?
For many people without a traditional pension, Social Security may be their primary source of guaranteed retirement income. I would compare that expected benefit with my essential monthly expenses, including housing, food, utilities, insurance, healthcare, and transportation.
The difference between those expenses and my dependable income is what I call the guaranteed income gap. That gap helps determine how much of my savings I may want to use to create an additional contractual income stream.
I would not automatically place my entire portfolio into an annuity. I would first decide how much income I need, how much liquidity I want to keep, and how much money I still want invested for growth.
💡 Pro Tip: Build your income plan around necessary expenses first. Once those bills are covered by dependable income, it may become easier to let the rest of your portfolio remain invested through market volatility.
2. I Would Consider Using an Annuity to Create My Own Pension
Annuities are used to fund many traditional pensions, and they can also allow an individual to create a personal stream of lifetime income. In exchange for placing a portion of your savings into a contract, an insurance company can provide income according to the selected terms.
If I was married, I would strongly consider joint lifetime income. That way, the contractual income could continue for my wife if I passed away first.
This matters to me because one spouse often handles most of the investing and financial decisions. Joint income can help make sure the surviving spouse does not have to manage a complicated portfolio simply to keep the household income coming in.
If I was single, I could compare a single-life payout instead. Because the insurance company is covering only one life, that option may provide a higher starting income than a comparable joint-life option.
👉 Want to see how much personal pension income your savings may generate? Use the annuity calculators on my website, then schedule a call if you want help comparing the available options.
3. Here Is What a $500,000 Income Plan Could Look Like
In the example from my calculator, I used the following assumptions:
- I am 65 and live in Nevada.
- My wife is four years younger.
- I placed $500,000 into an annuity.
- We chose joint lifetime income.
- We begin taking income immediately.
Under that specific illustration, the income was approximately $34,000 per year. If I also received roughly the same amount from Social Security, our combined income could be around $70,000 per year, or close to $6,000 per month.
Those figures are only an illustration. Actual payouts depend on factors such as age, state, deposit amount, income start date, whether the income covers one or two lives, and the rates and contract terms available at the time.
The broader point is that someone without an employer pension may still be able to turn part of a lump-sum portfolio into predictable retirement income. A larger deposit could create more income, while a smaller deposit could still help cover part of the income gap.
4. If I Could Keep Working, I Would Consider Delaying Income Until 70
If I was healthy at 65 and wanted to continue working, I would compare the immediate payout with the income available if I waited five years. Deferring the annuity income could allow the contract’s income base to grow and could produce a larger annual payout later.
For example, the same $500,000 was placed into an annuity at age 65, but joint income did not begin until age 70. The illustrated income increased from about $34,000 to roughly $55,000 per year.
The example showed an income base growing at 8% annually and compounding to about $734,000 after five years. Applying the illustrated 7.5% payout rate produced approximately $55,000 in annual joint lifetime income.
It is important to understand that an income base used to calculate withdrawals is generally not the same as cash value available for withdrawal. The exact rules, fees, benefits, and limitations depend on the specific annuity contract.
If payments continued through age 95, the illustration projected approximately $1.44 million in cumulative income. If I lived to 100, another five years of $55,000 payments would add roughly $275,000, bringing total illustrated payments to around $1.7 million from the original $500,000 deposit.
That does not mean every buyer will receive those exact results. It shows how longevity can make lifetime income valuable, especially when a younger spouse may continue receiving joint income after the older spouse dies.
👉 If you are deciding between income now and a larger payout later, schedule a call with me and we can compare both scenarios side by side.
5. I Would Coordinate the Annuity With Social Security
My plan would not treat Social Security and annuity income as separate decisions. I would look at how they work together to create a dependable retirement paycheck.
In my hypothetical example, I continue working until age 70 and wait until then to claim Social Security. I estimated approximately $50,000 per year for my benefit and used another $25,000 as an illustrative benefit for my wife, giving us roughly $75,000 in combined Social Security income.
Adding the illustrated $55,000 of joint annuity income would bring the total to approximately $130,000 per year in guaranteed or contractual income.
That Social Security estimate is only a planning assumption. A spouse’s actual benefit depends on each person’s earnings history, claiming age, and Social Security rules, so I would verify both estimates before building the final plan.
My goal would be to create enough dependable income that our lifestyle would not be dictated by short-term market performance. If the market fell sharply, I would still want the freedom to pay our bills and take a planned vacation without being forced to sell investments at a bad time.
6. I Would Keep Part of My Portfolio Invested for Growth
I like growth, and I plan to remain invested in the stock market throughout retirement. Creating contractual income does not mean I would abandon growth investments.
For example, if I had $1 million, I might place $500,000 into an annuity and keep the other $500,000 invested. If the invested portion grew substantially over time, I could later use part of those gains to purchase an additional layer of income.
In the video above, I used a hypothetical scenario in which the invested $500,000 doubles to $1 million after about seven years. That outcome is a goal, not a guarantee, because actual market returns and the time required to double an investment are uncertain.
If it happened, I might use another $500,000 to buy more lifetime income. Because my wife and I would be older, an immediate annuity payout could potentially be higher based on the applicable mortality assumptions and rates.
That second income layer might add roughly $50,000 per year in the illustration, increasing total dependable income from approximately $130,000 to around $180,000 annually. I could then leave the remaining invested money growing and consider repeating the process years later.
This is sometimes called income stacking: creating one income layer now, preserving growth assets, and potentially adding another income layer later. It can provide a balance between present security, future income, and continued market participation.
💡 Pro Tip: A growth projection is not a promise. I would test the plan under lower returns, longer market downturns, and higher expenses before committing money to another contract.
7. I Would Compare the Market Before Choosing a Contract
Not every annuity offers the same payout, and the contract with the most familiar name may not provide the strongest income for your exact situation. Carrier, age, location, start date, deposit amount, and payout structure can all affect the result.
My calculators compare available options from more than 70 carriers. You can enter your information and review income-rider, single-premium immediate annuity, and deferred-income annuity scenarios before speaking with me.
That transparency is important. I want you to see what is available before a meeting so you can ask better questions and recognize whether a recommendation is truly competitive.
If you currently have a pension with a lump-sum option, you can also compare the pension’s promised monthly benefit with the income an annuity may provide using that lump-sum value. A rollover is not automatically better, so I would compare the income, survivor benefits, guarantees, liquidity, and other contract terms before making an irreversible decision.
Conclusion
If I was 65 with no pension, I would first calculate my essential expenses and expected Social Security income. Then I would consider using part of my portfolio to create joint lifetime income, while keeping the rest invested for liquidity and growth.
If I could keep working until 70, I would compare the benefits of delaying both Social Security and annuity income. Over time, I might add more income contracts as my invested assets grew, allowing me to build my own pension in layers.
The right strategy will be different for every household. Before moving money, I would compare multiple carriers, understand the contract terms, confirm the Social Security assumptions, and make sure enough liquid savings remain available.
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