Can Your Retirement Income Cover Your Must-Pay Bills?
October 8, 2026
Your property tax bill, the electric bill, your Medicare premium, and a pharmacy refill all arrive on schedule, whether the market rose or fell last month. Once you retire, the question becomes whether the income you can count on for life covers those bills. October is National Retirement Security Month, a good time to run a simple self-check. List your must-pay bills, add up the income that lasts for life, and subtract the income from the bills. If your income falls short, the size of that shortfall could indicate how much annuity income would need to cover.
Which Retirement Expenses Count as Must-Pay Bills?
Must-pay bills are the expenses you’d have to cover even in a lean month, the costs that keep you housed, fed, insured, and healthy. Start by splitting your expected retirement spending into two lists:
- Needs: Housing (mortgage or rent, property taxes, homeowners insurance, and repairs), utilities, groceries, Medicare and other insurance premiums, out-of-pocket health costs, basic transportation, minimum debt payments, and taxes
- Wants: Travel, dining out, hobbies, and gifts
For reference, households headed by someone 65 or older spent an average of $61,432 in 2024. That total included $22,193 for housing, $4,480 for utilities, and $7,799 for healthcare. Your own numbers will differ, so use the averages to check your needs list for categories you may have missed.
Some expenses don’t sort neatly. Helping an adult child or giving regularly to your church can feel as fixed as the electric bill, and for many 1891 members, giving belongs on the needs list. Recognizing which expenses feel essential and which are more flexible can provide a clearer picture of your potential lifetime income needs in retirement.
What Lifetime Income Will You Have Coming In?
Once you have a needs total, the next step is the income side. Lifetime income means payments that continue for as long as you live. Social Security qualifies, and so does a pension if you take it as monthly payments for life. If you take a pension as a lump sum, consider counting it as savings instead. Your Social Security account shows your personal benefit estimate so that you can work from your own number.
A 401(k) or IRA doesn’t count as lifetime income, because withdrawals and market drops can drain the balance while you’re still living. Those accounts still have a job in your plan. They can pay for wants and emergencies or provide funds for a future annuity purchase.
If you’re married, check what happens to each income stream when one spouse dies. Social Security survivor benefits and your pension’s survivor option determine how much of your combined income continues for the surviving spouse. Run the gap check twice: once with both incomes, and once with the income the surviving spouse would keep.
How Do You Measure Your Retirement Income Gap?
The math takes one line: monthly must-pay bills minus monthly lifetime income equals your gap.
Here’s a hypothetical example with round numbers. A retired couple’s needs total $5,000 a month. Social Security brings in $3,800, and a small pension adds $500, for a total of $4,300 in lifetime income. Their gap is $700 a month, or $8,400 a year.
Your result will land in one of three places:
- Income covers your needs with room to spare: Your savings can go toward wants and emergencies.
- A small gap: A modest amount of added lifetime income, or a trim to the needs list, could close it.
- A large gap: Closing it may take more than one step, such as adding lifetime income and revisiting housing, the largest category in the 2024 spending averages.
Before you settle on a number, build a cushion into your needs total, especially for health care. In a 2026 survey, two in five retirees said their healthcare expenses had run higher than they expected, and the same share said their overall expenses had run higher. A cushion keeps one higher-than-expected bill from turning into a shortfall.
Run the check once a year and again after a major change, such as retiring, moving, losing a spouse, or choosing a pension payout.
Where Annuities Can Fill the Gap in Your Existing Plan
Annuities can turn part of your savings into lifetime income that covers the gap, while Social Security, any pension, and the rest of your savings stay in place. Can annuities cover all of your basic expenses? The answer depends on the size of your gap and how much savings you can set aside to convert into income. Some people can close the gap entirely, and others may cover part of it. The right annuity also depends on when you need the income to start.
If You’re Retiring Soon or Already Retired
A single premium immediate annuity can begin paying income within about a month of purchase. Through 1891, you choose how long the payments last. Lifetime payments continue for as long as you live. Set-period payments last a chosen number of years, from five to 25, and then stop. A combination pays for a set period and keeps paying for the rest of your life if you outlive that period.
When exploring retirement income needs, it can be helpful to understand the difference between income designed to last for a specific period and income designed to continue for life. This distinction can be especially important when considering how ongoing expenses may be covered throughout retirement.
If You’re Still Several Years Away
Deferred annuities let you build the money for that future income now, and each one grows your savings differently. A fixed indexed annuity earns interest tied to a market index, and a market drop won’t reduce its account value below your premium. A multi-year guaranteed annuity pays a fixed interest rate for a set number of years, so you know what your money will earn during that time. A flexible premium deferred annuity lets you keep adding money as you work, providing another way to accumulate funds for the future. Depending on the annuity and its contract provisions, accumulated funds may later be used to create a stream of lifetime income in retirement. Understanding how each type of annuity accumulates value and provides income can help consumers have a more informed conversation about the options available to them.
Start With the Bills That Can’t Wait
Your must-pay bills keep your life steady, from the home you want to stay in to the prescriptions you refill each month. When lifetime income covers them, a market drop or a surprise expense doesn’t put those essentials at risk.
An 1891 representative can help you run the numbers and see whether annuities fit your gap. At 1891 Financial Life, we specialize in tailored insurance solutions that meet diverse needs. Our team is equipped to help you navigate these decisions with expertise and compassion. Contact us today for personalized assistance and to explore your options.
About the Author
Thomas Adamson, CLU, ChFC, FICF, AMTC, CFFM
Thomas Adamson launched his insurance career in 1968 with New York Life and developed skills in management, marketing, recruiting, training, and development of new and experienced agents.
Tom has been involved in fraternal Home Office Sales, Marketing, Product Development, and Training for the last 20 years. He truly appreciates the opportunity to blend his faith with his profession. He has been an advocate for the agent in the Home Office and brings a unique perspective to marketing and product development. Tom is also involved in philanthropic efforts and community-based activities; as a dedicated parent and grandparent, he has a passion for volunteering on behalf of children.
Tom’s mission is to “provide an environment for agents to successfully design insurance plans that give our clients and members the financial peace of mind they deserve.”
About 1891 Financial Life
Our culture is about looking out for you, for others, for family, for the community. That is how we go “Beyond Life Insurance.”
At 1891 Financial Life, we don’t just sell policies; we offer possibilities. We take pride in giving back to the communities we serve by providing quality and comprehensive insurance solutions. We are a Fraternal Society, which means the sales from these financial service products help fund member benefits, along with social, educational, and volunteer programs designed to respond to community needs. Our commitment to excellence has been recognized by Forbes, naming 1891 Financial Life among “The World’s Best Life Insurance Companies” in 2023 - and for the second time, as one of “America’s Best Life Insurance Companies,” ranking #1 in Term Life Insurance for 2026.
Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs, no matter what stage of life you’re in.