The 10 Biggest Sources of Retirement Income

Yahoo gives us the ten biggest sources of retirement income as follows:

• Social Security
• Retirement Accounts
• Pensions
• Savings Accounts and CDs
• Stocks and Stock Mutual Funds
• Home Equity
• Part-Time Work
• Inheritance
• Annuities or Insurance
• Rent and Royalties

Here's where I stand on each of these:

• Social Security - We've previously discussed whether Social Security is an insurance program (which it was designed to be) or a retirement program (which was what it seems to have morphed into.) Well, it looks like more and more people are counting on it as a major source of retirement support. Check out this from Yahoo:

According to a recent Gallup survey of 1,020 Americans, 54 percent of retirees say Social Security is a major source of income. About 34 percent of current workers expect Social Security to largely fund their retirement, the highest Gallup has recorded in this decade-long annual survey, and up 7 percentage points since 2007.

Personally, I'm counting on zippo from Social Security and anything I get will simply be a bonus added to my other retirement income.

• Retirement Accounts, Savings Accounts and CDs, Stocks and Stock Mutual Funds, Annuities or Insurance - I'm lumping all these into one group because they all result from the same source -- money we all save for retirement. This money can be put into retirement account (which then can buy stocks or mutual funds), saved in CDs and savings accounts, or used to buy annuities/insurance. Personally, this is where I'm keeping my retirement funds. I'm saving in my 401k as well as in IRAs, a SEP IRAs, and "regular" (taxable) accounts. I have set my retirement number and am now counting the years until I have saved what I need.

• Pensions - I have no pension. That's why I'm saving as much as possible myself.
• Home Equity - It won't be a major source of retirement funds for me since my house isn't worth that much (it's not like I own a $750,000 home with no mortgage -- my house is worth probably $170k right now). That said, I can see us down-sizing at some point where we buy a smaller, cheaper home. This will free up some cash to help fund retirement.
• Part-Time Work - I don't know if I'll ever fully retire (as in do no work). I might work for pay or I might simply volunteer (as I do now, just more of it), but I don't think retirement for me will be job-less.
• Inheritance - Ha! I wish! If anything, I may need to help provide for my parents (which I'm happy to do, BTW. They took care of me for much of my life and I'm fine with helping them if need be.)
• Rent and Royalties - No rent, but I could have some royalties that develop over the next ten years or so. We'll have to see what transpires.

How about you? What are your major planned sources of retirement income?

Comments

[DailySaving]

I'm with you on SS. It's gravy. Not counting on that at all. Control your own destiny! Brian

[Old Limey]

Pensions ---------------------------------------------------------------- 9.9%
Social Security --------------------------------------------------------- 5.5%
CDs 38%, Muni Bonds 44%, Bond funds 18% ------------------ 84.6%

We married in England in 1956, are both savers, and at that time had a net worth of $450.
We retired in 1992 and have received zero inheritances.
We live very comfortably on our pension and social security checks, about all we withdraw from our investments is money to pay the taxes due on the mandatory required distributions from our IRAs. Our investments continue to grow by about 3%-4% each year. I retired as an aerospace staff engineer, my wife retired as a part-time school district pre-school teacher, neither of us were every laid off. We raised three children, all self supporting, and have led a full life that included lots of travel to many exotic places.

[Kevin]

I agree with the social security as well. I never even consider it to be a part of my future retirement income. Anything from it will just make life that much more easy.
I put in my 401k up to my employer match to get the free money and then put some more away in a roth.
I'm sure that percentage for pensions will go down as even more businesses move away from them.

[MC]

I 48 and I will get some amount of a pension through my workplace, although the pension plan is being phased out in my company in favor of 401K's with matching over the next 5 years.

Bizarrely, my company has always reported to employees what our upcoming pension amount will be based on the number of years we've employed there and our age at retirement. It's cited as some number of dollars per month "with social security taken into account". So confusing--is this "on top of" social security? Will the pension fund get my social security checks and then just give me the pension? Is this typical for a pension--to roll in social security?

[Stephan]

def not countin on retirement. and i think realistically the only thing we can coutn on is anything we save while we still work. all the others could provide income or could not, such as an inheritance or home equity. start saving now, and avoid all these question marks.

Preferred Financial Services

[Josh Miller]

I'm not counting or trusting in Social Security, but I'm also rethinking the whole "total retirement" meme. I like the inclusion of some kind of part-time work or side business income.

Financial Theology

[Squirrelers]

I too am not counting on Social Security being there when folks of my age retire. I'm 39. Better to view it as a bonus, or pleasant surprise, if it happens - and don't factor it into any retirement calculations.

[Largebill]

Reading the comments it is good to see people are not counting on SS. First step to fixing the problem is recognizing there is a problem. Anyone my age (48) or younger who is paying attention tends to understand that SS is not sustainable and should not be counted on. Sadly, the knowledge of math and SS in the general population (and congress) is not as good as shown here.

Personally, going through your list:
1. SS: I expect nothing from SS.
2. Retirement accounts: Fully funding ROTH X 2 & TSP
3. Pension: In the minority as my wife and I both will have decent pensions. Won't make us rich, but I will never be sober due to financial concerns.
4. Home equity: Not a lot. Refinanced last year to stick $$$ into stocks when market was chasing a bottom.
5. Part time work: I retired young (Navy). I don't get paid but am very active with charities through our church.
6. Inheritance: What? My parents raised 9 kids so that was out of the question. My mother-in-law is 92 and I hope she has many more years ahead of her and that she spends her last dollar the day before she dies buying something that makes her happy.
7. Rent and Royalties: None, but am looking at developing rental properties.

Bottom line: We're not rich, but as long as we spend less than we earn we're fine.

[Budgeting in the Fun Stuff]

Social Security - It'll be a welcomed bonus.

Retirement Accounts, Savings Accounts and CDs, Stocks and Stock Mutual Funds, Annuities or Insurance - We save in my 401k, our Roth IRA, a Scottrade account, ING, and Smarty Pig.

Pensions - Hubby is a teacher and is eligible for a full pension in 25 years...70% of his salary. I try to save like he won't have one in case he ever wants to switch careers.

Home Equity - We'll be living in our house and prefer to stay completely debt free once we get there, so I don't see using our home equity for retirement purposes.

Part-Time Work - I want to volunteer more and hubby will continue to ref until he can't anymore.

Inheritance - Maybe a little. Both sets of our parents have saved well for their own retirements, but I doubt much will be left in they live as long as I hope they will.

Rent and Royalties - We'll see. ;-)

[Jess]

I am in a hot pickle, but I am trying to figure out how to get out of it and get started on the right road. I am 42, and I have an 18 year old daughter. I am a single mother and have been since she was 4 months old when her dad hit the road without so much as a fare-thee-well. The rare child support check that showed up was usually in the amount of $17.38. I did get three that were under a dollar. Needless to say, he has not been and will not be any help in taking care of expenses for my daughter's schooling or future, so we are taking the humble route with community college, etc. I am advising her about having savings starting now and making plans for the future-- things that nobody told me about.

Because I didn't get off to an informed start, I have myself backwards and upside down to this day.

I put myself through college while my daughter was growing up, as I had not completed a degree program at the time of her birth. That put me in the hole financially, as I racked up $40,000 in student loans. I still have most of that to pay, as I have deferred payments while trying to survive our daily lives. I acquired a teaching credential, but the last decade has been rotten for the teaching market, so I have no secure contract. I have done a number of temporary contracts, substituting, part-time work, and all of that is for the same school district, so what I HAVE managed to put into retirement all goes to the same place--the state public employees retirement system. Currently, that investment holds little more than $10,000.

At 42 years of age, my picture looks bleak, but I am determined to turn it around--though I am not yet sure just how.

With the student loan debt, no savings or IRAs or investment accounts etc, and no assets besides a paid off 2005 car, I am don't have much going on. I have opted for a retirement plan that pays into social security as well as the state pension, so I pay a bit more out of my paychecks (many teacher retirement plans don't pay any social security) but, while I am not counting on social security, I don't want to have all my eggs in one basket. In any event, it is difficult to save for tomorrow when you are just trying to survive this day. I was laid off last June (2010) and have only part-time work right now. My income dropped from over $3000 per month to less than $700 a month. That really doesn't leave me much to work with right now.

Pretty scary. Any advice?

[FMF]

Jess --

I'll post your question as a "Help a Reader" piece in mid-December. Tune in then...