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8 Ways to Help Close a Retirement Income Gap

Advice to help you improve the likelihood that your retirement income will cover your expenses.

by Mark Tosczak - April 16, 2019

Have you discovered a gap between the income you’d like to have in retirement and the income you think you’ll get based on your investments and current savings rate? It happens to lots of people.

“They have a number in mind about how much they need to save before they can retire,” says Will Larson, Retirement Planning Strategist at Wells Fargo Advisors. “Sometimes they can get there and sometimes they can’t.”

As concerning as it might be to discover a retirement income gap, knowing it’s there is the first step in closing it — usually by increasing your income and assets, reducing retirement spending, or both.

Here are eight ways to help close a gap.

1. Save more while you’re still working. If you haven’t retired yet, then saving more now can mean more assets to draw on later in life. Larson says 15% of income is a commonly used target for the rate of retirement savings, though the exact rate will vary based on individual circumstances. “Having a higher savings rate earlier makes sense,” he says.

2. Plan to spend less. Another way to help close a gap is to scale back your retirement spending plans. Do you really need the beach house and the RV? Larson advises dividing retirement expenses into two categories: fixed and necessary on one hand and discretionary expenses on the other. “You want to be sure you can cover your fixed or necessary expenses,” he says.

3. Work longer. “I’ll work longer” is often the default response to an income gap, Larson explains, as it allows more time to save before dipping into retirement assets. But Larson warns this isn’t an option for everyone, and you shouldn’t assume you’ll be able to work indefinitely. Health problems for you or a loved one, for example, can stop you from working.

4. Delay taking your Social Security benefits. You can earn more Social Security benefits over your lifetime by taking them later. Waiting until age 70 can mean higher monthly payments and greater lifetime benefits.

5. Look at the potential return on your assets. Taking steps to help ensure the money you’ve already invested is appropriately allocated is another strategy to help increase available income during retirement. Ask your Financial Advisor to review your investments, including your risk levels and asset allocation.

6. Create additional lifetime income. Annuities are financial products offered by insurance companies that provide income in the form of benefit payments. People often use certain types of annuities to help ensure that they don’t outlive their assets. Annuities come in different types, so consult your Financial Advisor to determine whether an annuity might be appropriate for you.

 7. Consider downsizing. Selling a large house and moving into something smaller as you near or enter retirement can reduce ongoing property maintenance costs and free up money that could be reinvested for retirement income. Moving to a location with lower living costs is a related strategy.

 8. Reduce your legacy goal. Many people plan to leave a legacy that will live beyond them. This may include giving assets to charity or leaving your heirs significant assets. These are laudable goals, but if you face a retirement income gap, consider reducing the size of your legacy, freeing up assets that could close that income gap.

Finally, Larson says you shouldn’t assume you’ll live off just the interest or dividends from your investments; taking money from principal is OK — you just need to help ensure your assets last for the rest of your life. Your Financial Advisor can help you determine the appropriate amount to take from your principal.


Mark Tosczak has spent 25 years wrangling words for newspapers, magazines, businesses, nonprofits, and other organizations. He focuses on health care, science, and business.

Image by iStock

Additional Resources

These six mistakes can have a huge impact on your retirement lifestyle.

Variable annuities are sold by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus, which contains this and other information, can be obtained by calling your financial advisor. Read it carefully before you invest.

Insurance products are offered through nonbank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.