If retirement expenses exceed income, first calculate the size of the monthly shortfall and identify what is driving it. Then review income and spending options before increasing withdrawals: benefit rules, taxes, account restrictions, age, and household needs can all change which choices make sense.
Calculate the retirement income gap
Compare the money actually available to spend each month with a representative month of expenses. Use take-home income rather than a gross amount, and include dependable sources such as Social Security, pension payments, and scheduled withdrawals.
Irregular bills can hide the size of the gap. Convert expenses such as property taxes, insurance premiums, car repairs, gifts, and medical costs into monthly or annual amounts so they are included in the picture. Track spending long enough to capture costs that do not arrive every month.
Write down the result: monthly spending minus monthly income. A positive number is the amount the household must cover through reduced expenses, added income, savings, or some combination. This calculation is a planning tool, not a recommended withdrawal rate.
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Find out what is causing the shortfall
Separate essential costs—such as housing, utilities, food, insurance, and medical care—from more flexible spending. Then note whether each major expense is temporary, recurring, or rising. This helps distinguish a one-time bill from a persistent mismatch, without assuming that every household can readily reduce housing or health costs.
Check recurring bills and subscriptions for services you no longer use or costs that can be changed. Also verify that the income list includes all benefits and pension payments you receive or may be eligible to claim. Do not count a possible benefit or pension option as available income until you have confirmed the terms that apply to you.
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Review income options before taking more from savings
Depending on your circumstances, options to investigate may include a benefit or pension choice, part-time work, or a planned withdrawal from savings. Compare each option by its effect on current cash flow, future income or savings, taxes, eligibility, reversibility, and benefits. The relevant trade-offs depend on your age, benefit history, account types, and other household details.
Social Security and IRA withdrawals
IRA withdrawals do not count as earnings that reduce Social Security retirement benefits. The same is true of pension payments, annuities, and interest or dividends from savings and investments, according to the Social Security Administration. That benefit rule does not determine whether a withdrawal is taxable; federal tax treatment is a separate question.
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You can receive Social Security retirement benefits while working, but wages may trigger the earnings test before you reach full retirement age. For 2026, the SSA says that a person under full retirement age for the entire year has $1 in benefits withheld for every $2 earned above $24,480. In the calendar year the person reaches full retirement age, the limit is $65,160 for earnings before the month full retirement age is reached, with $1 withheld for every $3 above that amount. Starting with the month full retirement age is reached, the earnings limit no longer applies. These are 2026 figures; check the SSA’s current guidance for later limits and details.
Check account rules, age, and taxes before increasing withdrawals
Taking more from an IRA or workplace retirement plan may provide cash now, but the distribution can have tax consequences and account rules may restrict access. The IRS says a 10% additional tax generally applies to retirement-plan or IRA distributions before age 59½ unless an exception applies. Previously untaxed money may also be subject to regular income tax. The 10% figure is a general rule, not a prediction of your personal tax bill; exceptions and plan terms matter. See the IRS overview of hardships, early withdrawals, and loans.
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Workplace-plan loans and hardship distributions
A workplace plan may offer a loan or hardship distribution only if its terms permit one, and the conditions vary by plan. Eligible plan loans must be repaid under the plan’s rules; an IRA-based plan cannot offer participant loans. A hardship distribution is not a loan: it is not repaid to the plan account and can permanently reduce retirement savings. It is generally taxable when it comes from money that has not yet been taxed and may also be subject to the additional tax. The IRS explains the consequences of 401(k) hardship distributions. Confirm availability and terms with your plan administrator before relying on either option.
Required minimum distributions
Required minimum distributions (RMDs) apply to certain retirement accounts when the applicable rules require them; they do not apply to every retiree or every account at the same time. An account owner may withdraw more than the required amount. Missing an RMD can result in an excise tax, with a lower rate available in qualifying circumstances when the shortfall is corrected on time. Because account type and individual circumstances affect the rules, check the IRS RMD FAQs for the requirements that apply to you.
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Get tailored help for a persistent or complex gap
If the shortfall continues, or you are weighing benefit timing, account withdrawals, or taxable income, a fiduciary financial professional may help you evaluate the household’s options. A tax professional can help assess the tax effect of a distribution or its timing. These decisions depend on facts such as age, state, household budget, debts, health expenses, account balances and types, tax status, and benefit history; general rules cannot determine a personalized plan.
Older adults who qualify can check the IRS Seniors & Retirees page for information about Tax Counseling for the Elderly, a free tax-return preparation resource. Eligibility and local availability should be confirmed.
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