King Life
How Much of My Portfolio Should Generate Guaranteed Income?
GUARANTEED INCOME
How much of your portfolio should generate dependable retirement income?
There is no universal percentage. A practical starting point is to identify essential monthly expenses, subtract dependable income from Social Security and pensions, and then decide how much of the remaining gap should be covered by contractual income rather than market-dependent withdrawals.
Start with the income gap, not a product allocation
If essential spending is $7,000 per month and dependable income is $4,500, the gap is $2,500. That gap is a more useful planning number than saying an arbitrary percentage of the portfolio belongs in annuities.
Three buckets to think about
- Essential income: money needed for non-negotiable monthly expenses.
- Liquidity: cash and short-term reserves for emergencies and near-term spending.
- Growth: assets positioned for long-term inflation defense, discretionary goals and legacy.
What can raise the need for dependable income?
- High essential expenses relative to Social Security and pension income
- Low tolerance for reducing spending after a market decline
- Concern about outliving assets
- A spouse who wants a simpler, more predictable income plan
- Limited willingness to manage withdrawals during volatile markets
What can lower the need?
- Strong pension and Social Security coverage
- Large liquid reserves
- Low withdrawal needs relative to assets
- Flexible discretionary spending
- Comfort with portfolio volatility and withdrawal management
Why not guarantee everything?
Because liquidity and growth still matter. Inflation can erode purchasing power, and long-term retirement goals may require assets that can grow. The objective is to cover the right amount of spending with the right type of income, not to eliminate all market exposure.
Why not leave everything invested?
Because essential expenses do not pause during bear markets. If every bill requires a portfolio withdrawal, sequence-of-returns risk can become more important.
Understand sequence-of-returns risk →
See how an income floor and growth bucket can work together →