Can I Retire? Series — Part 6 of 12
Your portfolio isn’t the only thing funding your retirement.
For most people, there’s at least one source of guaranteed income that shows up every month regardless of what the stock market does. Social Security is the big one. Pensions, if you’re lucky enough to have one. Maybe rental income, annuities, or part-time work you plan to continue.
This income matters because it reduces the burden on your investments. Every dollar of guaranteed income is a dollar your portfolio doesn’t need to produce. And that changes everything about how much you need saved and how long it will last.
Why Guaranteed Income Changes the Math
Let’s say you need $80,000 a year in retirement. If your portfolio has to cover all of it, you need a big portfolio — roughly $2 million using a 4% withdrawal rate.
But what if Social Security gives you $30,000 a year? Now your portfolio only needs to cover $50,000. That’s $1.25 million at the same withdrawal rate. You just “saved” $750,000 in required assets.
Add a small pension of $15,000? Now you only need $35,000 from investments. That’s $875,000. The gap keeps shrinking.
This is why knowing your guaranteed income isn’t optional — it’s central to the whole calculation. It’s also why two people with identical portfolios might have completely different retirement readiness: one has Social Security and a pension covering 60% of their needs, the other has nothing.
Social Security: The Baseline
For most Americans, Social Security is the foundation. It’s not going to make you rich, but it’s reliable, inflation-adjusted, and lasts for life.
What you’ll get: Depends on your earnings history and when you claim. The average benefit in 2024 is around $1,900/month ($22,800/year). Higher earners who wait until 70 can get over $4,500/month ($54,000/year). Your specific number is on your Social Security statement — you can check it at ssa.gov.
When to claim: You can start as early as 62 (reduced benefit) or as late as 70 (maximum benefit). Every year you delay past your full retirement age (66-67 for most people) adds about 8% to your benefit. That’s a guaranteed return you won’t find anywhere else.
The catch: If you retire before you claim Social Security, you have a gap to bridge. Retiring at 60 but claiming at 67 means seven years of zero Social Security income. Your portfolio has to cover everything during that window.
Spousal benefits: If you’re married, you may be eligible for spousal benefits (up to 50% of your spouse’s benefit) or survivor benefits if your spouse passes away. Factor this in if it applies.
Pensions: The Endangered Species
If you have a traditional pension — a defined benefit plan that pays you a set amount for life — count yourself fortunate. They’re increasingly rare outside of government, military, and some unionized industries.
What you’ll get: Usually a formula based on years of service and final salary. Something like 2% × years worked × final average salary. Twenty-five years at a $80,000 final salary might give you $40,000/year.
Key questions: Is it inflation-adjusted? Many aren’t, which means it loses purchasing power over time. Does it have survivor benefits for your spouse? What happens if the pension fund is underfunded?
Lump sum vs. annuity: Some pensions offer a choice: take a lump sum now or monthly payments for life. This is a complex decision involving interest rates, life expectancy, and investment confidence. There’s no universal right answer, but don’t take the lump sum just because it looks like a big number.
Other Income Sources
Rental income. If you own rental properties, the net income (after expenses, maintenance, vacancies, and property management) counts. Be realistic — gross rent is not net income. And remember: rental income isn’t truly “guaranteed” the way Social Security is. Tenants leave. Things break. Markets change.
Annuities. If you’ve purchased an annuity that pays lifetime income, that counts. The income stream is what matters, not the account value (which you’ve already converted to income).
Part-time work. Many people plan to work part-time in early retirement — consulting, freelancing, a low-stress job they enjoy. This income can bridge the gap before Social Security or reduce portfolio withdrawals. But be honest with yourself: is this realistic at 70? At 75? Don’t count on working income for a 30-year retirement.
Royalties, dividends, trust income. If you have reliable passive income from intellectual property, family trusts, or significant dividend-paying holdings outside your main portfolio, it can count — but be conservative. Dividends can be cut. Royalties can decline.
Timing Matters
Not all income starts on day one of retirement.
If you retire at 58, Social Security might not start until 67 or 70. Your pension might not kick in until 62. For those first years, your portfolio is doing all the heavy lifting.
This creates phases in retirement:
Phase 1 (early retirement): High portfolio withdrawals, little or no guaranteed income. This is the most vulnerable period.
Phase 2 (Social Security kicks in): Portfolio withdrawals drop significantly. Pressure on investments decreases.
Phase 3 (later years): Guaranteed income covers more of your needs. Portfolio serves as supplement and cushion.
Understanding this timeline is critical. The calculator on caniretire.app lets you specify when income sources begin, so it can model the full picture — not just a single snapshot.
How to Count It in the Calculator
The calculator asks for guaranteed annual income. Here’s how to think about what to enter:
Social Security: Use your estimated benefit at your planned claiming age. Find this at ssa.gov/myaccount. If married, include both benefits.
Pension: Use the annual amount from your pension statement. If it’s not inflation-adjusted, note that purchasing power will decline over time.
Other income: Be conservative. Only include income you’re highly confident will continue reliably.
If income sources start at different times, you may need to run multiple scenarios — one for the early years before Social Security, one for after. The difference can be dramatic.
Your Homework
Make a list of every income source you’ll have in retirement:
For each source, write down three things: the annual amount, when it starts, and whether it’s inflation-adjusted.
If you don’t know your Social Security estimate, stop and look it up. This takes five minutes at ssa.gov and it’s one of the most important numbers in your retirement plan.
Add up the guaranteed income that will be available from day one of retirement. Then note when additional income kicks in and how much. This gives you a clear picture of what your portfolio actually needs to cover — which is the subject of Part 7.
Next: Part 7 — The Gap
