Sources of income in retirement

You know the sources of your income today, but do you know what retirement income sources you’ll need to allow you to live comfortably later? The answer is probably a combination of Social Security, personal savings, investments and employee-sponsored retirement plans.

You may even need to depend on part-time work as a source of retirement income. And if you’re lucky, you may also be among the shrinking number of people who’ll receive a company pension.

Social Security

Plan on Social Security accounting for roughly one-third of your retirement income. Depending on when you start receiving Social Security benefits.

Where will the other two-thirds come from?

Employee-sponsored retirement income plans

A retirement savings plan  such as a 401(k), 403(b) or 457 comes with tax benefits, such as pre-tax contributions and the opportunity for tax-deferred growth. Plus, investing is easy because the money comes right out of your paycheck and is automatically deducted before you have a chance to think about spending it.

Just keep in mind that when you take withdrawals, the money is taxed as ordinary income and may be subject to a 10% penalty if you take it before age 59½.

Individual retirement accounts

Whether you’re self-employed or like do-it-yourself investing, IRAs can help you with your retirement income goals. Invest in a Traditional IRA and enjoy tax-free growth now but pay taxes when you withdraw. Or choose a Roth IRA and pay taxes now but take tax-free withdraws later.

As long as you earn taxable income you can contribute to an IRA.

Employee-sponsored pension plans

A pension benefit is typically calculated based on years of service, retirement age and ending salary.

If you're eligible to receive a pension benefit in retirement, call your benefits office and ask for your accrued and projected pension benefits.

• Your accrued benefit is the annual amount you'd receive at your pension plan's normal retirement age if you left your job today.
• Your projected benefit is an estimate of the annual amount you’ll receive if you stay at your current job, with your current pay, until your pension plan's normal retirement age.

If you’ll be covered by a government pension in retirement, it may be reduced by your Social Security benefit. For more information around retirement questions you may have, visit Retirement & Investing in our Learning Center.