Does Guaranteed Income Cover Your Retirement Basics? The Floor Just Got Cheaper to Build
There are two ways to pay for retirement. One is to draw a percentage from a pile of savings and hope the markets cooperate. The other is to make sure the bills that must be paid, rent, groceries, insurance, medicine, are covered by money that arrives whatever the markets do, and let savings pay for the rest. Planners call the second approach an income floor. With the 10-year Treasury above 5% for the first time since 2023 and annuity quotes at their best in years, the floor is cheaper to build than it has been in a long time, and this post shows exactly what it costs.
Quick answer
A retiree with $3,500 a month of essential bills, $2,100 of Social Security and an $800 pension has a floor that covers 83% of the basics, leaving a $600-a-month gap. Filling that gap takes $180,000 of savings drawn at 4%, about $144,000 of Treasuries at a 5% yield with the capital kept, or roughly $96,000 handed to an insurer for a lifetime annuity at 7.5%. Delaying Social Security to 70 raises the check by 24% and shrinks the gap to about $96 a month.
What counts as the floor, and what counts as essential
Floor income is anything that arrives every month regardless of the stock market: Social Security, a pension, an annuity you already own, and, if you choose to count it, steady part-time work. Savings do not count, because savings can fall.
Essential expenses are the bills you cannot skip: housing including property tax and insurance, utilities, groceries, health premiums and medicines, transport, and minimum debt payments. Leave out travel, restaurants, gifts and hobbies; those come from savings and can flex in a bad year. For a typical retired household in 2026 the essentials run $3,000 to $4,000 a month. The Bureau of Labor Statistics puts total spending for households over 65 at about $5,000 a month, roughly a third of it discretionary.
The retirement income floor calculator does one calculation with those inputs: guaranteed income divided by essentials. Above 100% is secure. Between 80% and 100% is nearly secure. Below 80% the floor is at risk, and the calculator tells you the monthly gap and what it takes to fill it.
A worked example, then three ways to fill the gap
Take the calculator's defaults: $3,500 of essentials, $2,100 of Social Security (the 2026 average check is about $2,000) and an $800 pension. Guaranteed income is $2,900, coverage is 83%, the verdict is "nearly secure," and the gap is $600 a month, or $7,200 a year.
There are three ways to turn $7,200 a year into guaranteed money, and the 5% Treasury changed the price of two of them:
| How you fill a $600-a-month gap | Money it takes | What happens to the capital |
|---|---|---|
| Savings drawn at the classic 4% rate | $180,000 | Probably lasts 30 years; can run out in a bad decade; leftover goes to heirs |
| Treasuries at today's 5% yield, spending only the interest | $144,000 | Kept in full; income does not rise with inflation; needs reinvesting when the bonds mature |
| Lifetime annuity at a 7.5% payout (single life, age 65) | $96,000 | Gone; the check is guaranteed for life; nothing to heirs |
In autumn 2024, with the 10-year near 3.7%, the middle row cost about $195,000; today it costs $144,000. That is the whole reason to revisit the floor now. The annuity row is cheaper still, and the trade-off is the last column: the insurer keeps the capital. Our post on annuity vs portfolio at a 5% Treasury works through that decision on its own.
Most people should not pick one row. A common plan is Treasuries or an annuity for the first $300 to $400 of the gap and the 4% draw for the rest, so that the floor is guaranteed and the savings keep their flexibility.
The cheapest floor of all: wait on Social Security
Before buying anything, look at the one lever that costs nothing but patience. Each year you delay Social Security past your full retirement age, 67 for anyone born in 1960 or later, adds 8% to the check, up to age 70. That is 24% in all, for life, with inflation increases on top. Claiming at 62 instead cuts the check by 30%.
Run the same example with Social Security delayed to 70: the $2,100 becomes $2,604, guaranteed income rises to $3,404, coverage to 97%, and the gap falls from $600 to about $96 a month. The savings needed to fill it drops from $180,000 to $28,800. Bridging three years of a $2,100 check from savings costs about $75,000, which is far less than the $150,000 of floor it removes the need for. The Social Security breakeven calculator shows the age at which the larger check overtakes the years of smaller ones; for most people it is the early 80s, and the floor argument is about the years after that.
What the floor looks like for other households
| Household | Guaranteed income | Coverage | Gap a month | Savings to fill it at 4% |
|---|---|---|---|---|
| Single, $2,000 Social Security, no pension, $3,500 essentials | $2,000 | 57%, at risk | $1,500 | $450,000 |
| Same, Social Security delayed to 70 | $2,480 | 71%, at risk | $1,020 | $306,000 |
| Same, plus $1,000 a month of part-time work | $3,000 | 86%, nearly secure | $500 | $150,000 |
| Couple, $5,000 essentials, $3,500 combined Social Security, $800 pension | $4,300 | 86%, nearly secure | $700 | $210,000 |
The first row is the common case and the one to take seriously. Most private-sector retirees have no pension, and for them Social Security alone covers a bit more than half of a modest set of essentials. The rows below it are the levers in order of cost: delay the claim, work a little longer, and only then buy income or draw savings.
Two things the floor does not protect you from
Inflation on the fixed pieces. Social Security rises with inflation every year; the 2026 cost-of-living increase was 2.8%. Most private pensions and fixed annuities do not. An $800 pension buys about 25% less after ten years at 3% inflation, so a floor that leans on fixed income has a gap that grows. Plan for it, or fill part of the gap with Treasury inflation-protected securities, which pay a fixed rate above inflation.
Health costs that arrive later. Essentials at 67 are not essentials at 85. The calculator uses today's bills; revisit it every couple of years, and treat a rising Medicare premium or a new prescription as a change to the floor, not to the extras.
What to do this month
- Add up the essentials from a real month of statements. Not the budget you intend; the bills that actually cleared.
- Get your Social Security estimate from your online account, and note the figure at 62, 67 and 70.
- Put those in the retirement income floor calculator with any pension, and read the verdict. If you are in the "nearly secure" band, the delay-to-70 line usually closes it.
- If a gap remains, price it three ways with the table above. With Treasuries at 5%, the interest-only row is the one most people have not run since 2007.
FAQ
What is the difference between flooring and the 4% rule?
The 4% rule draws 4% of your savings a year for everything and accepts a 5% to 10% chance of running out over 30 years, depending on the study. Flooring guarantees the essentials with income that does not depend on markets, so only the extras can run short. Flooring costs more up front; the 4% rule is cheaper and riskier. Most people combine them: guarantee the basics, draw 4% to 5% from the rest.
Is a 5% Treasury really "guaranteed" income?
The interest is, for the life of the bond. What is not guaranteed is the rate you reinvest at when it matures, or the buying power of a fixed coupon after years of inflation. A ladder of Treasuries maturing in different years smooths the first problem; inflation-protected Treasuries address the second at a lower starting yield.
Should part-time work count in my floor?
Count it while you have it and plan for it to stop. Work is the most flexible floor income and the least durable; health and hiring both change. A floor that only works with $1,000 a month of wages is a floor with a deadline, so the calculator's verdict with the wages removed is the one to plan around.
How much does delaying Social Security from 67 to 70 actually add?
Twenty-four percent of the full-retirement-age check, for life, indexed to inflation. On $2,100 a month that is $504 more every month, or about $6,000 a year. The cost is three years of checks you did not collect, roughly $75,000, which the larger check repays by the early 80s.
My pension has no inflation increase. How much should I discount it?
At 3% inflation a fixed payment loses about a quarter of its buying power in ten years and half in 23. A practical rule is to count 75% of a fixed pension when you plan a floor you expect to rely on for a decade or more, and to fill the rest with something that rises.
Sources
- Social Security Administration — my Social Security account -- your benefit estimates at 62, 67 and 70, and the delayed-retirement-credit and early-claiming reductions.
- Bogleheads — Safe withdrawal rates (Bengen 1994 and the Trinity study) -- the basis of the 4% draw used to size the savings that fill a gap.
- Bureau of Labor Statistics — Consumer Expenditure Survey, households aged 65 and over -- the roughly $5,000-a-month total spending figure and the essential share.
- U.S. Department of the Treasury — daily Treasury yield curve, September 2026 -- the 5% 10-year yield used in the Treasury row.