Don’t Let Your Savings Run Dry: How Retirees Can Secure Lifetime Income in 2025

The fear of outliving one’s savings is a top concern for retirees, with 64% of Americans worrying more about running out of money than dying, according to a 2025 Allianz Life survey. As life expectancies rise—65-year-olds today can expect to live to 84 (men) or 87 (women), per Social Security projections—and traditional pensions fade, retirees face the challenge of making their savings last 20–30 years or more. With economic uncertainties like inflation, market volatility, and potential changes to Social Security adding to the anxiety, creating a reliable stream of lifetime income is more critical than ever. At ABC Financial, LLC, we specialize in helping retirees build strategies to ensure their money lasts as long as they do. This article explores key strategies to secure lifetime income, their pros and cons, and how professional guidance can make the difference.

The Growing Need for Lifetime Income

Retirement has shifted dramatically in recent decades. Only 15% of employees had access to a pension plan in 2023, leaving most retirees reliant on Social Security, personal savings, and 401(k)s. Social Security typically replaces only 40% of pre-retirement income, far short of the 80% most retirees need to maintain their lifestyle. Meanwhile, rising healthcare costs—averaging $394,954 for a healthy 65-year-old couple—and long-term care expenses, which can exceed $111,000 annually, threaten to deplete savings. The impending sunset of the Tax Cuts and Jobs Act (TCJA) in 2025, which could reduce the estate tax exemption and alter tax planning, further complicates financial security. These factors underscore the need for strategic planning to generate income that lasts a lifetime.

Strategies to Ensure Lifetime Income

Retirees can explore several strategies to create a steady income stream, each with unique benefits and trade-offs. Below, we outline the most effective approaches, supported by recent research and expert insights, along with their pros and cons.

1. Lifetime Income Annuities

Annuities are contracts with insurance companies that convert a portion of savings into a guaranteed income stream for life, mitigating longevity risk—the chance of outliving your money. Fixed or deferred income annuities (DIAs) provide predictable payments, often starting later in retirement to cover late-life expenses like healthcare.

Pros:

• Guaranteed Income: Payments continue regardless of market fluctuations or lifespan, offering peace of mind.

• Customizable Options: Single-life or joint-life annuities can cover one or both spouses, and some include inflation adjustments to maintain purchasing power.

• Fills Income Gaps: Annuities can cover essential expenses not met by Social Security or pensions, freeing other assets for discretionary spending.

Cons:

• Loss of Liquidity: Once purchased, annuities typically lock in funds, limiting access to capital for emergencies.

• Complexity and Costs: Fees, such as surrender charges or administrative costs, can reduce returns, and understanding terms requires careful review.

• Inflation Risk: Fixed annuities without cost-of-living adjustments may lose purchasing power over time.

2. Strategic Withdrawal Plans

A strategic withdrawal plan, such as the 4% rule, involves withdrawing a fixed percentage of your portfolio (e.g., 4% in the first year, adjusted for inflation annually) to sustain savings over 30 years. A 2023 Morningstar study found a 90% success rate for a 4% withdrawal rate with a balanced portfolio (40% stocks, 60% bonds). More dynamic approaches adjust withdrawals based on market performance or personal needs.

Pros:

• Flexibility: Retirees can adjust withdrawals to account for market conditions or unexpected expenses, unlike annuities.

• Retains Control: Savings remain accessible, allowing retirees to tap principal if needed.

• Growth Potential: Keeping funds invested in a diversified portfolio can outpace inflation over time.

Cons:

• Sequence-of-Returns Risk: Early market downturns, as seen in 2025’s volatile markets, can deplete savings faster if withdrawals are high, with 70% of portfolio failures tied to losses in the first five years of retirement.

• Requires Discipline: Overspending or poor market timing can jeopardize long-term sustainability.

• No Guarantees: Unlike annuities, income depends on investment performance, introducing uncertainty.

3. Maximizing Social Security Benefits

Delaying Social Security claims until age 70 increases monthly benefits by up to 8% per year past full retirement age (66–67), providing a 24% higher payout compared to claiming at 67. For example, a $2,000 monthly benefit at 67 becomes $2,480 at 70, adding $5,760 annually for life.

Pros:

• Guaranteed and Inflation-Adjusted: Benefits are protected against inflation and continue for life, reducing longevity risk.

• Spousal Benefits: Strategies like claiming spousal benefits or survivor benefits can optimize household income.

• Tax Advantages: Up to 85% of benefits may be taxable, but strategic planning can minimize tax impact.

Cons:

• Delayed Income: Waiting until 70 requires bridge financing from savings or part-time work, which may not be feasible for all.

• Health Risks: If a retiree’s lifespan is shorter than expected, delaying benefits may yield less total income.

• Policy Uncertainty: Proposed changes to Social Security, such as means-testing or benefit reductions, could affect future payouts.

4. Roth Conversions and Tax-Efficient Withdrawals

Converting traditional IRA or 401(k) funds to a Roth IRA during lower-income years provides tax-free withdrawals in retirement, avoiding Required Minimum Distributions (RMDs) at age 73. Tax-efficient withdrawal strategies prioritize distributions from taxable, tax-deferred, and tax-free accounts to minimize tax liability.

Pros:

• Tax Flexibility: Roth withdrawals don’t increase taxable income, helping retirees stay in lower tax brackets.

• No RMDs: Roth IRAs are exempt from RMDs, allowing savings to grow longer or be passed to heirs.

• Long-Term Savings: Paying taxes upfront during low-income years can reduce lifetime tax burdens.

Cons:

• Upfront Tax Cost: Conversions trigger immediate taxes, which can be substantial if not planned carefully.

• Irreversible: Post-T 2017 TCJA changes eliminated the ability to recharacterize conversions, making decisions permanent.

• Complexity: Requires precise calculations to avoid pushing retirees into higher tax brackets or triggering surtaxes like the Net Investment Income Tax.

5. Diversified Investment Portfolios

Maintaining a diversified portfolio with a mix of stocks, bonds, and other assets, such as real estate or Treasury Inflation-Protected Securities (TIPS), can generate income through dividends, interest, and capital gains while preserving principal. A balanced portfolio (e.g., 60% stocks, 40% bonds) can sustain a 4% withdrawal rate over 30 years with a 90% success rate, according to Morningstar. Adjusting allocations as retirees age—shifting toward bonds or TIPS for stability—helps manage risk while combating inflation.

Pros:

• Growth Potential: Stocks offer long-term growth to outpace inflation, which is critical for a 20–30-year retirement. A $2 million portfolio with 60% stocks could be worth $854,000 after 30 years, compared to depletion by year 29 for an 80% bond portfolio.

• Flexibility: Retirees can sell assets selectively to meet income needs or reinvest earnings for future growth.

• Inflation Protection: Equities and TIPS help maintain purchasing power, unlike fixed-income assets alone.

Cons:

• Market Volatility: Early retirement losses, as seen in 2025’s tariff-driven market dips, increase sequence-of-returns risk, with 70% of portfolio failures linked to poor returns in the first five years.

• Management Complexity: Requires ongoing rebalancing and monitoring, which can be daunting without expertise.

• No Guarantees: Unlike annuities or Social Security, income depends on market performance, introducing uncertainty.

Why Professional Guidance Matters

The strategies above—annuities, withdrawal plans, Social Security optimization, Roth conversions, and diversified portfolios—require careful coordination to balance income, growth, and risk. Missteps, like withdrawing too much during a market downturn or misjudging a Roth conversion, can jeopardize financial security. The 2025 economic landscape, with potential TCJA sunset, inflation concerns, and market volatility, underscores the need for expert planning. A financial professional can run simulations, stress-test plans, and adapt to changing laws, ensuring retirees avoid the 41% increased risk of depleting savings when retirement extends from 30 to 35 years.

How ABC Financial Secures Your Lifetime Income

With decades of experience, ABC Financial, LLC, under the leadership of Susan Morrison, helps retirees build robust plans to ensure their income lasts throughout their entire lifetime. Our approach is rooted in personalization, expertise, and proactive adaptation:

• Tailored Strategies: We assess your savings, income sources, and goals to craft a plan integrating annuities, tax-efficient withdrawals, and diversified investments. For example, we might combine a fixed annuity for essential expenses with a balanced portfolio for growth, optimized for 2025’s tax landscape.

• Tax and Estate Integration: We align lifetime income strategies with tax planning (e.g., Roth conversions before TCJA expires) and estate goals, ensuring wealth preservation for heirs.

• Ongoing Support: We monitor market shifts, like 2025’s volatility, and adjust withdrawals or allocations to mitigate sequence-of-returns risk.

• Collaborative Expertise: Working closely with your CPA and estate attorney, we create a customized plan that helps address healthcare costs (up to $394,954 for a couple) and long-term care needs.

• Client Empowerment: We educate you on options, from annuities’ guarantees to Social Security’s 24% boost at 70, fostering confidence in your financial future.

Don’t let the fear of outliving your savings overshadow your retirement. Contact ABC Financial, LLC today for a consultation. Let us help you secure a steady income stream, so you can enjoy your golden years with peace of mind.

ABC Financial: 505-433-2255

Email: smorrison@affinityadvisorynetwork.com