Retirees who rely on this one type of income are happier and more likely to spend more to enjoy their golden years — here’s how you can too

The benefits of defined benefits

One way to get this income is to work for an employer that provides a defined benefit (DB) pension plan. A DB plan is one where your employer guarantees lifelong regular payments based on your salary and how long you worked for the employer.

But DB plans have become much less common over the years. As of March 2023, only 10% of non-unionized private-sector workers had access to a defined benefit pension, according to the U.S. Bureau of Labor Statistics. They’re most commonly offered in unionized jobs and the public sector, including the military, although you can also find them in some skilled trades and in nursing.

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The security of Social Security

Although DB plans may be hard to come by, you’ll likely get Social Security benefits. For many, they won’t be enough to be a sole source of income, but they have the benefit of being a known, regular payment. They will also last your lifetime, and your dependents may even be able to collect survivor benefits when you pass away. You’re eligible to start collecting Social Security benefits at 62, but the longer you wait — up to age 70 — the more you’ll receive each month.

The amount you are paid is based on your 35 best-earning years, so you may be able to increase it by working longer to gain more high-paying years. You can also work after you’ve started collecting benefits, and your earnings during those years could potentially be used to calculate your future benefits.

You can buy happiness

A third way to get this type of income is by purchasing an annuity. Annuities are contracts with insurance companies that, in exchange for a lump sum or series of installments, will issue you regular payments for a set time or for the rest of your life.

For retirement, you’ll probably want to buy a lifetime annuity, which will continue paying you for as long as you live. You may also be able to enter a contract that will continue to pay a beneficiary after you pass away, until the contract value has been paid out.

There are three main types of annuities: A fixed annuity pays a regular, fixed amount set in the contract; a variable annuity pays an amount based on the performance of underlying investments; and an indexed annuity pays a base amount with the potential for upside based on the performance of an underlying index such as the S&P 500.

While fixed and indexed annuities have lower base payments, they are less risky than a variable annuity, and may provide payments that more closely resemble those of a DB pension or Social Security. If it’s happiness you’re after in retirement, then you may want to consider how you can set yourself up with fixed, lifetime payments.