How Will You Pay for Retirement?

How Will You Pay for Retirement?

It’s not unusual for retirees to have multiple sources of income. According to the Social Security Administration, people age 65 and older receive a majority of their income from four sources. These source-points cover a wide range of income needs, from monthly living costs to healthcare spending and other retirement expenses.

If you’re in or near the “retirement red zone” (a period of 10 years before retirement and the first 10 years in retirement), now is a critical time. Decisions made now – and decisions which are neglected – will have a significant impact on the rest of a retirement lifetime, no matter how long it lasts. It’s a stage at which to figure out how you will pay for all of your retirement years.

With that said, here’s a look at how people age 65 and older are paying for retirement, and some ways to maximize retirement income.

Important Retirement Income Sources

Social Security. A majority of retirees receive Social Security payments. The Social Security Administration reports that for 52% of Americans age 65 and over, Social Security makes up at least half of their income. Around 25% use Social Security for 90% or more of their income. Your Social Security payments are based largely on the 35 years of employment in which you received the most income.

One of the biggest factors in how much you will receive in Social Security payments is your age when you file. You can sign up at age 62. But if you file before your full retirement age (for many retirees, this is age 66 or 67), you will get a permanent reduction in monthly payouts. However, it pays off if you wait. Your benefit increases nearly 8% for each year you delay signing up. If you wait until age 70, you will fully maximize your benefit.

Workplace retirement accounts. 401(k) plans, defined-benefit pensions, and other workplace retirement benefits provide income for 44% of retirees. Workplace-sponsored retirement accounts also make up 21% of total income for Americans age 65 and up.

A retirement pension gives the security of a guaranteed income stream. But many corporations and other organizations are dumping their pension obligations due to financial constraints. Many retirees and pre-retirees have found annuities to be a great solution. Annuities offer contractual guarantees of a steady, reliable income stream that can last as long as you live. According to research from LIMRA, most annuity buyers get annuities to supplement income from pensions and Social Security.

Income from assets. According to the Social Security Administration, assets generate a little bit below 10% of aggregate retirement income for Americans age 65 and up. Despite this smaller percentage, retirees with asset income tend to have stronger financial security than those without it. Asset income may consist of interest, dividends, royalties, rental payments, or other forms.

Retirement leads many people to shift their financial strategy to asset protection and distribution. Nonetheless, asset growth remains a relevant priority. Inflation drives up costs of goods and services. For retirees, there is “senior inflation,” or the fast-rising costs of various goods and services tied to aging, such as prescription drugs, health costs, and other related items.

It may be in your favor to have some monies in the stock market to combat inflation; however, it is important to balance with keeping a suitable proportion of savings protected in safe money vehicles. These savings can be allocated toward fixed-income needs and helping you to maintain your lifestyle.

Working longer. Retirement doesn’t mean a complete departure from the workforce for everyone. Many seniors continue to work in retirement. According to the Social Security Administration, 29% of retirees draw income from retirement employment. A little over 32% of all income comes from employment earnings in retirement.

Additional years of work can help maximize income in retirement, but it’s a trade-off. That is less time that can now be spent doing the things you want to do. Overall, many retirees are finding this attractive option for accumulating more retirement dollars. But remember, employment income may increase your tax liability on Social Security benefits, depending on how much you earn. Confer with a qualified professional in taxation for more information.

What about Your Income Strategy?

At, you can connect with a financial professional and uncover powerful income strategy options for your future. If you’re at the beginning stages of planning for retirement, or you want a second opinion on your existing plan, we can help you.

Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

Next Steps to Consider

  • Start a Conversation About Your Retirement What-Ifs

    retirement planning services next steps

    Start a Conversation About Your Retirement What-Ifs

    Already working with someone or thinking about getting help? Ask us about what is on your mind. Learn More

  • What Independent Guidance
    Does for You

    independent vs captive advice

    What Independent Guidance
    Does for You

    See how the crucial differences between independent and captive financial professionals add up. Learn More

  • Stories from Others
    Just Like You

    safe money working with us

    Stories from Others
    Just Like You

    Hear from others who had financial challenges, were looking for answers, and how we helped them find solutions. Learn More

Proud Member