This Risk-Free Option Could Be Perfect for Supplementing Your Social Security

When you retire, chances are good that Social Security is going to be a major income source for you. In fact, according to the Senior Citizens League, 27% of survey respondents get all of their income from Social Security, while another 20% get between 76% and 99% of their income from the benefits program. 

It’s not surprising that Americans rely so much on Social Security. Very few people get pension income from their employers these days, and saving and investing in a 401(k) can be difficult for those living paycheck to paycheck or focusing on meeting their pressing needs. Unfortunately, living on Social Security alone isn’t a great option. 

The good news is, there is a risk-free alternative worth considering that can provide the stable, reliable income that Social Security offers while also giving you a little more to live on than government retirement benefits alone can provide.

Living on Social Security alone won’t cut it

While close to 30% of all Americans don’t have income to supplement Social Security, the reality is that this can be a tough spot to be in because Social Security is only designed to replace around 40% of pre-retirement income.

While most people don’t need to replace their entire income after they stop working, the common recommendation is to replace around 70% at a minimum and ideally closer to 80% to 90%.  If you’re trying to make ends meet on your retirement benefits alone, you’ll have to seriously downgrade your living standards.

In fact, with an average Social Security benefit of just $2,008 as of mid-2025, the typical retiree would be living with an income just barely above the poverty level if they didn’t have extra funds. 

This risk-free option is a great choice to supplement Social Security

Since having more than just retirement benefits to cover your costs is critical, it’s important to make a plan for where this extra money will come from — especially as the Federal Reserve reports there has been a very sharp drop in employer-provided pensions that offer guaranteed income.

One option is to put money into a 401(k) or IRA, both of which provide tax advantages for investing. The problem with these options is that:

• You have to know how to invest this money
• You have to know how to structure withdrawals

The good news is, there are pretty simple options like target-date funds that allow you to easily manage your investments throughout your working life, even if you don’t know much about the stock market. These funds put your money into a mix of different assets that are appropriate for your age and risk tolerance.

There’s bad news, too, though. There’s still no guarantee when it comes to the income your 401(k) will offer. What’s more, you still have to structure your withdrawals in a way that can maximize your chances that your money won’t run out. This is a major source of stress and worry for a lot of people.  That’s one reason why 92% of respondents to a TIAA survey said they would be interested in a guaranteed income source as a supplement to their retirement benefits. 

For those interested in a guaranteed income source, an annuity can be a great option. Annuities involve entering into a contract with an insurance company. You’ll either make a single premium payment (a large lump sum payment) or make payments over a set period of time.  Your annuity will grow in value on a tax-deferred basis, and the premium payments you are making and the growth that you’re achieving will allow you to qualify for future income. 

Usually, this future income comes either in the form of a lump sum withdrawal or regular, fixed payments over time. While there are different kinds of annuities, one very popular option that many people choose for retirement offers lifetime income with a certain guaranteed minimum number of years of payments.

Regardless of the type you choose, though, annuities can offer tax benefits in the form of tax-deferred growth. They also offer lifetime income benefits that can guarantee you income for life, and even a death benefit paid out to loved ones when you are gone. 

If you want a source of reliable income that presents virtually no risk to collect along with your Social Security benefit, it’s definitely worth looking into whether an annuity is right for you.