When it comes to retirement, are some Americans playing it too safe? The “flooring” approach to retirement income, a saving strategy that focuses on steady and predictable payouts, remains popular among investors. But in exchange for stability, are retirees setting themselves up for a dull future and missing out on gains?

Here’s why being “boring” could be a double-edged sword — it might provide financial security, but could also have you passing up potential growth, and the flexibility you might need to truly enjoy your golden years.

What is flooring?

The flooring approach to retirement planning focuses on establishing a steady stream of income to cover essential expenses throughout retirement. The goal is to set a financial “floor” that ensures basic needs, such as housing, healthcare, and groceries, are covered with guaranteed sources of income unaffected by market fluctuations.

Typically, retirees accomplish this through a combination of Social Security benefits, pensions, and annuities — all of which offer reliable payouts that don’t depend on investment performance.

Many retirees supplement this “floor” with a secondary “upside” portfolio that can include stocks, bonds, or other growth-oriented investments. The upside portfolio is designed to fund discretionary expenses, like travel or hobbies, allowing for some financial flexibility. If the market suffers, only these non-essential expenses are affected, and the floor never falls out from under you.

Why is flooring popular?

The flooring approach is attractive to retirees because it removes much of the uncertainty from retirement income planning. In an era when traditional pensions are less common and Social Security’s long-term viability is being discussed, many retirees seek the sense of stability the flooring strategy provides.

It also has the perk of allowing for consistent monthly budgeting, reducing financial anxiety and leaving more time for enjoying retirement without fretting over market swings. For retirees who remember the volatility of past recessions, or are simply risk-averse, flooring can bring a welcome sense of security.

With Americans living longer than they used to in previous decades, many are concerned about outliving their savings. Flooring addresses this by ensuring a portion of their income is secure for as long as they need it.

Pros and cons

Flooring offers significant advantages, especially for risk-averse retirees seeking peace of mind. With a guaranteed income to cover essential expenses, retirees can feel secure in knowing they won’t face financial hardship if the markets underperform. Those who aren’t comfortable with investment management find this approach straightforward: Because their basic expenses are covered, they can make more conservative investment decisions with any additional funds.