Plan for Income in Retirement
As you plan for retirement, you should consider all the possible sources of income you could receive. Will it be enough to help you live comfortably in retirement?
Currently, many people receive a combination of a pension, Social Security, and deferred compensation. But, because of the uncertainty around how long Social Security may be sustained, it’s probably a good idea to not depend on this income in retirement. Many retirees also 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.
Most pensions weren’t designed to replace 100% of working income and many companies have done away with traditional pensions altogether.
It will help you work through your retirement planning if you know how much pension benefit you may receive at retirement. The amount is typically calculated based on your years of service, the age at which you retire and your ending salary.
If you're eligible to receive a pension, ask your employer for your accrued and projected pension benefits.
- Accrued benefit: This is the annual amount you'd receive at your pension plan's normal retirement age if you left your job today.
- Projected benefit: This 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, your Social Security benefit could be even lower.
To find out what you might receive from Social Security request a Social Security Statement.
- Call 1-800-772-1213
- Go to www.ssa.gov
Consider contributing to a 401k or similar plan to prepare for retirement. These plans come with tax benefits such as pre-tax contributions and the opportunity for tax-deferred growth.
Investing is easier because the money comes right out of your paycheck and is automatically deducted before you have a chance to think about spending it. You can also find investments that suit your comfort with risk as well as your retirement objectives. Keep in mind that when you take withdrawals, the money is taxed as ordinary income and may be subject to a 10% penalty you take it before age 59½.
When is the best time to begin saving. The answer is: The sooner you start saving and investing, the better off you will be.
This is based on the investment concepts of time and compounding. Investing involves market risk, including possible loss of principal.