There is a number most families have never calculated. It is the gap between the monthly income they need in retirement and the monthly income their current plan will actually produce. That gap – the income gap – is the most important number in your financial life that you have probably never seen.
How the Gap Works
Say you need $5,000 per month in retirement to maintain your current lifestyle. Social Security might provide $2,000. Your 401(k), if it performs as projected, might generate another $1,500 per month over a 25-year retirement. That leaves a $1,500 monthly gap – $18,000 per year – that has no source.
Multiply that by 25 or 30 years of retirement and you are looking at a shortfall of $450,000 or more. That is the income gap. And most families discover it when it is too late to close it comfortably.
Why the 401(k) Is Not the Full Answer
A 401(k) is an accumulation tool. It helps you save. But it does not guarantee income. When you retire and start withdrawing, the balance depends on market performance, your withdrawal rate, and how long you live. A major market correction in the first years of retirement can permanently damage your plan.
This is called sequence-of-returns risk. Even if the market recovers over time, withdrawals during the down years deplete the account faster than projected. Your money can run out while you are still alive.
The Income Floor
A fixed indexed annuity is designed to solve this specific problem. It creates a guaranteed income stream that you cannot outlive, regardless of what the market does. It is not a replacement for your 401(k). It is the layer underneath it – the income floor that holds even if the market does not cooperate.
Think of it as the foundation of your retirement income plan. Social Security is one layer. Your 401(k) is another. The FIA is the layer that fills the gap between what those two produce and what you actually need every month.
Know Your Number
The first step is calculating your income gap. What do you need monthly in retirement? What sources of income do you have? What is the difference? That number tells you exactly how large the gap is and what kind of plan is needed to close it.
Most families have never done this math. Not because they do not care about retirement. Because no one ever walked them through it. The income gap is preventable. But only if you know what it is before you need to close it.
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