Diversifying your retirement income means having money come from several sources instead of depending on just one. Your income might include Social Security, a pension, retirement account withdrawals, an annuity, investments, or part-time work.

Learn why variable income and investments are vital to ensuring a secure retirement, the different options for variable investments, and how these products can fit into your overall retirement strategy.

Diversifying Your Retirement Portfolio: At a Glance

Why should I have more than one source of retirement income?

Although a fixed income amount may be enough at the beginning of your retirement, the effects of inflation can diminish the value of this amount after several years. Let's say the nation experiences a historically average inflation rate of 3%. In 22 years, nearly twice as much money will be needed to cover your income needs versus what was required at the beginning of your retirement.

For example: At a 3% annual inflation rate, a $50 tank of gas today could cost about $96 in 22 years, while a $1,500 monthly rent payment could rise to about $2,874. That means even if your monthly income stays the same, inflation steadily chips away at its purchasing power.

Americans are increasingly prioritizing financial stability over building wealth. Nationwide’s 2026 Financial Growth & Protection Index scored 54 out of 100, suggesting people are slightly more focused on protecting their finances right now than pursuing growth. Among the adults surveyed, 81% would prefer guaranteed, predictable retirement income over investments with greater growth potential.¹

Get tips on how to create a retirement income plan and how to make your retirement savings last.

Can a pension lose value because of inflation?

Yes. Even if you have guaranteed income from a pension or annuity, most pension plans and fixed annuity retirement income payments don’t rise with inflation. This means those payments may not cover all your needs as prices and expenses change. 

How can I protect my retirement income from inflation?

You can help protect your retirement income from inflation by using a mix of income sources. For instance, you can add a variable (non-static) income stream to your retirement portfolio. Instead of remaining the same over time, a variable income stream has the potential to grow, which may help offset the effects of inflation. 

One option for a variable income stream is investing part of your savings in stocks or stock-based funds. It’s true their value can rise and fall, especially over shorter periods. But stocks have historically grown over time and helped investors keep pace with inflation. Note: Past performance does not guarantee future results.

What happens to my retirement income during a market downturn?

A market downturn can lower the value of retirement accounts tied to investments, such as a 401(k) or IRA. That’s why allowing enough time for your investments to grow is important, as short-term results (over only a few years) may be disappointing. 

When your money can remain invested for six or seven years or longer, short-term market swings may have less impact, since your investments have more time to recover from downturns. Over long periods, stocks have historically trended upward and helped investors keep pace with inflation. But returns are never guaranteed, and stock investments can lose value, even over several years.

Having several income sources and some money in lower-risk accounts can help you avoid selling investments when the market drops. 

Learn how to protect your retirement income from market volatility.

What are examples of variable income investments?

Mutual funds, exchange-traded funds (ETFs), and variable annuities are among the investments that may offer growth potential. Mutual funds and ETFs can grow tax-deferred when held in accounts such as a traditional IRA, 401(k), or 403(b). Variable annuities also offer tax-deferred growth, although fees, risks, and withdrawal rules vary.

You don’t have to give up reliable income from Social Security, a pension, or an annuity. Instead, you may be able to supplement those payments with investments that have the capacity to grow in value. Combining reliable income with growth-oriented investments can provide stability while helping your money keep pace with inflation. This balance may help support a more comfortable retirement over time.

What else can I do to plan for my retirement? 

In addition to diversifying your retirement income streams, there are other strategies you can use to get on track to financial stability once you leave the workforce. These include:

• Take charge of your debt by paying down credit card balances, medical bills, and your mortgage (if applicable) as much as possible.  
• Set up an emergency fund to cover unexpected major expenses or income disruptions that might affect your retirement savings.
• Start exploring Medicare coverage options to determine the most budget-friendly plan for your needs.
• Purchase long-term care insurance to ensure your finances are protected should you or your spouse need paid long-term care services.
• Contribute to a health savings account (HSA) that can help defray your out-of-pocket health care costs.

Discover more ways to build your retirement confidence.

The bottom line

Being proactive about retirement planning is critical. Leaving the workforce is a big life transition, and how you prepare now will go a long way in determining how financially secure you are later.

Jessica Johnston, Senior Strategist for Economic Well-Being at NCOA , explains it this way: “As huge numbers of older Americans enter retirement, those who are not prepared could end up facing financial difficulties in the long run.”

Keep in mind that retirement planning should center on your needs, not conventional, one-size-fits-all rules. Factors like rising inflation and health care expenses make predictable income and protection against major losses especially important. Rather than focusing only on building your savings, you need a plan for turning those savings into dependable income that can last the rest of your lifetime.

Visit our Work, Job Training, & Retirement Resources library to learn more about creating financial security in retirement. 

Source

1. Nationwide Financial Growth & Protection Index Results. June 2026.