Retirement Income Sources
According to the Bureau of Labor Statistics, these are the sources of retirement income and proportions thereof.
Bureau of Labor Statistics
Note that 60% of your retirement income sources are not within your control so it does not need to be addressed. Let’s address the sources of retirement income you can control. Let’s also note that the portion of retirement income you can control may be increasing as employer provided benefits have been on the decline (and thus the rise of self funded 401k plans). Additionally, this more recent data shows that pre-retirees expect to have more of their retirement assets coming form sources they can control:
EXPECTED RETIREMENT INCOME SOURCES
| 2003 Apr 7-9 (sorted by “major source”) |
Major source
|
Minor source
|
Not a source
|
|
% |
% |
% |
|
| A 401(k), IRA, Keogh or other retirement savings account |
47 |
34 |
17 |
| Social Security |
29 |
57 |
12 |
| A work sponsored pension plan |
28 |
32 |
39 |
| The equity you have built up in your home |
25 |
42 |
30 |
| Individual stock or stock mutual fund investments |
20 |
42 |
36 |
| Other savings such as a regular savings account or CDs |
19 |
52 |
27 |
| Part time work |
13 |
57 |
29 |
| Annuities or insurance plans |
10 |
36 |
53 |
| Money from an inheritance |
7 |
31 |
60 |
| Rent and royalties |
5 |
27 |
66 |
Source: Gallup Poll 2003
As you see form above, there are many sources of retirement income. In fact, within a 401k there are choices such as equity mutual funds, bond mutual funds and real estate investment trusts. Then we could further divide mutual funds into open end funds, closed end funds and exchange traded funds (ETFs). Within bonds, we have treasury securities, federally backed mortgage notes, corporate bonds and tax free bonds. Additional retirement income sources would include retirement annuities: traditional fixed annuities, variable annuities and equity indexed annuities. To supply any detail in one article would be overwhelming so in this blog, we have devoted at least one post to each of these retirement income sources and you can locate these posts using the category listing at http://www.retirement-income.net/blog.
The overall approach in designing your retirement income sources is to start with a retirement income calculator to determine your total retirement income needs. Step 2 is to subtract those sources of income you cannot control (social security, employer benefits, deferred compensation, etc) and this will leave us with the amount of income that needs to be provided by retirement income sources that you can control.
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March 5th, 2009 at 11:06 pm
I think stocks that have income producing dividends or etfs that do is a great way to invest. If you buy quality funds with good paying stocks you get income and if stocks go up you make more. Everyone thinks they live off selling the stocks i think you should try to live on the income and keep stocks.
Best etf funds lists last blog post..Gold double long etf.
June 7th, 2009 at 8:32 am
I agree people have to make thier own income in retirement. You can not just rely on social security or some 401 k look what happened this year make sure to have some orther income so you always have money.
October 26th, 2009 at 2:11 pm
Interesting to see that social security makes up less than 40% of retirement income. I would think most people’s 401k is nothing compared to the government. Is this in the aggregate? Or is this the profile of the typical American? I’m going to have to go with the former. The richest 5% are skewing the results.