You know the source of your income today, but do you know the sources you need in order to live comfortably in retirement? The answer is probably a combination of Social Security and deferred compensation. You may also be among the shrinking number of people who will receive a company pension. For some, it may also include part-time work.
Many retirees depend on part-time work as a major source of retirement income. If you don’t plan to work during retirement, you may need to give your personal savings an extra boost.
Knowing what pension benefits you may receive at retirement will help you work through your plans for the future. Your pension benefit is typically calculated based on your years of service, the age you retire and your 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 will receive if you stay at your current job, with your current pay, and until your pension plan's normal retirement age.
If you were born after 1960, you're not eligible for Social Security until age 67. Keep in mind, if you’ll be covered by a government pension in retirement, it may be reduced by your Social Security benefit.
To find out what you might receive from Social Security, you can request a Social Security Statement by calling 1-800-772-1213, or visiting the Social Security website.
For retirement savings, consider contributing to a 401(k), 403(b), 457 or similar plan. These plans come 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.
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.