We have some good news: According to a recent survey by the Employee Benefit Research Institute, 77% of retirees believe they can live comfortably throughout retirement. That’s good news, but what is the source of this confidence? It appears that today’s retirees draw income from a variety of sources, including the following…
Social Security. Assuming you worked and paid taxes long enough, you can count on drawing some amount of Social Security benefits. Of course, the longer you worked and the more you earned, the higher the monthly check.
According to the Social Security Administration, the average monthly benefit is just over $1,500 for individuals and nearly $2,600 for couples. That probably doesn’t sound like enough to live on, unless you’re extremely frugal, but it’s not intended to be. Social Security was designed as a supplementary source of retirement income, but retirees should plan to draw income from at least one other source.
Defined benefit (traditional) pension. Once a common source of retirement income, now only about a quarter of American workers have access to a pension plan.
Defined contribution retirement plan (such as a 401k). These types of plans have replaced pensions as the most common retirement provision associated with workplace benefit packages. However, the responsibility falls upon the worker to save money within the account. Just 24 percent of survey respondents identified their 401k as a major source of retirement income.
Individual Retirement Account (IRA). More than half of respondents reported saving money in an IRA. Many of those also hold a 401k.
Personal savings or investments. Everyone should have some liquid assets within a savings account or other easily accessible fund. Having this money set aside during retirement can help you to cope with emergency expenses, so that you don’t have to borrow or withdraw more than you had planned from a retirement account. Other investments can also shore up income.
Annuities. Products such as annuities can provide monthly income to retirees, but their structures can vary considerably. Working with a financial professional can help you to determine if an annuity is right for your situation.
Work. Many retirees choose to take up part time work or start a home-based business. The benefits can range from social involvement to personal fulfillment, but the paycheck is obviously helpful as well.
Help from family. A surprising 37 percent of retirees said they expect help from family to provide a source of income during retirement.
The main thing to remember is that you shouldn’t leave retirement planning up to chance. Whether you’ve yet to establish some of the above streams of income, or just want to maximize what you’ve already done, give us a call. We can review your retirement plans together and identify other opportunities that you might have overlooked.