If I didn’t trust Social Security, I would build a retirement income strategy that could cover my bills without it. I would use part of my savings to create guaranteed lifetime income, keep money liquid, and leave another portion invested for growth.
Do I think Social Security will still exist in some form? Personally, I do, but I would rather build a plan around income I have arranged for myself than depend entirely on what the program might provide in the future.
Here is how I would approach it, using the example from my video below.
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1. I Would Treat Social Security as Extra Income
My personal opinion is that Congress will continue trying to protect Social Security because so many people depend on it. But that does not mean I assume future benefits will be as generous as they are today.
I also suspect changes could affect younger people differently from those already near or in retirement. That is my opinion, not a prediction I would use as the foundation of a retirement plan.
Instead, I would ask: Could I cover my expenses if Social Security paid less than I expected?
For the strategy in this example, I take that question a step further and plan without counting on Social Security at all. That is a planning scenario, not a claim that the program is going away.
If benefits are available, they become an extra cushion. I could use that money for additional spending, healthcare costs, or simply more breathing room.
2. I Would Create My Own Pension With Part of My Savings
Many people reach retirement without an employer pension. An annuity contract can help create a personal pension by turning a portion of savings into lifetime income.
But I would not put all my money into an annuity. I would still want accessible cash and investments with room to grow.
In my example, I am 55 years old, have $2 million, and want income to begin at 62. Here is how I divide the money:
- $1 million toward an annuity designed to provide lifetime income.
- $200,000 in cash outside the stock market.
- $800,000 invested in the market for potential long-term growth.
The annuity has one job: provide the income I am counting on to cover my bills. The remaining money gives me flexibility and the opportunity to build additional income later.
This is an example, not a recommendation that everyone put half their savings into an annuity. The right amount depends on your expenses, assets, and income needs.
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3. I Would Compare Income Based on Our Ages and Start Date
The illustration in the video above uses a New Jersey resident who puts $1 million into an annuity at 55 and waits seven years before starting income. It also includes a wife who is four years younger, with income designed to cover both lives.
Those details matter. Your age, your spouse’s age, your state, your premium, and when you start income can all affect the available payout.
In the illustration, the annual income is approximately $116,000 starting at age 62. That figure belongs to the specific example shown, not a quote that applies to everyone.
Suppose I expect to need $100,000 a year and hope to have my house and other debts paid off by retirement. An illustrated $116,000 annual payment could provide the income foundation I am looking for, although I would still need to account for taxes and my actual expenses.
Waiting seven years is part of what supports that payout. I would not assume I could put in the same amount and receive the same income immediately.
💡 Pro Tip: Compare income starting now with income starting five or ten years from now. The timing can make a meaningful difference, so use your own ages and circumstances.
4. I Would Buy the Annuity for Lifetime Income
When I look at this strategy, I am buying protection against longevity risk: the possibility that my wife or I could live longer than our money otherwise lasts.
I am not buying the annuity with the intention of canceling it and pulling all the money back out later. I am buying an income stream designed to continue for life under the contract’s terms.
In the Midland illustration discussed in the video above, the account balance eventually reaches zero around my mid-70s. Yet the illustrated lifetime income continues under the contract’s income provisions.
That distinction is important. The remaining account value and the lifetime income benefit are not the same thing.
Over a long retirement, total payments could reach several million dollars. That does not mean I have a several-million-dollar cash account available to withdraw; it means payments accumulate over the years we live.
Annuity guarantees depend on the issuing insurance company’s claims-paying ability and the contract’s terms. I would want to understand those terms before committing any money.
5. I Would Keep Investments Growing and Add Income Over Time
Remember, I still have $1 million outside the annuity in this example. Of that amount, $200,000 is cash and $800,000 is invested in the stock market.
In the video, I explore what could happen if the $800,000 grew to $1.6 million over seven years and eventually reached about $2 million by age 65. Those are hypothetical growth assumptions, not guaranteed returns or a dependable schedule for doubling money.
The purpose of the example is to show how an income foundation could let me leave other investments alone. If my bills are covered, I may not need to immediately draw on that portfolio.
Then, if the portfolio grows enough and I want additional income, I could use another portion to purchase a second annuity.
For example, suppose I am 65, my wife is 61, and I use another $1 million to buy income that begins immediately. In the video above, I use a hypothetical $70,000 annual payout for that second purchase.
The income would stack like this:
- First annuity: $116,000 per year.
- Second annuity: $70,000 per year
- Combined income: $186,000 per year, without including Social Security.
The second payout would depend on the contracts and pricing available at that future time. I would not assume today that either the investment growth or that future payout will happen exactly as illustrated.
If circumstances support it, I could repeat the process later with whatever amount makes sense. I call this stacking income: adding another income stream as my assets and needs change.
6. I Would Build the Strategy Around My Own Numbers
You may be 55 with $500,000, or you may have $2 million, $5 million, or more. The example is meant to show the possibilities, not suggest that everyone needs the same amount to get started.
Some of my clients with larger portfolios use a portion of their assets to create income they want, even when they already have enough to cover their basic expenses. That income can support travel, additional spending, or helping family and friends while they are still alive.
For your own plan, I would start with four questions:
- How much income do you need your savings to provide?
- When do you want that income to begin?
- Does it need to continue for your spouse’s lifetime, too?
- How much money do you want to keep liquid and invested outside the annuity?
My strategy would be to create a dependable income foundation, preserve flexibility, and consider adding more income over time. If Social Security is there, I would welcome the extra cushion.
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