Different Types of Retirement Income Sources
You know the sources of your income today, but do you know what income sources you will need to allow you to live comfortably in retirement? The answer is probably a combination of Social Security and retirement vehicles. You may also be among the shrinking number of people who have a company pension plan. Many retirees also depend on part-time work as a major source of retirement income.
Here are some retirement income sources to consider:
Common Retirement Savings Plans
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 out of your paycheck and is deducted before you have a chance to spend 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.
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 until your pension plan's normal retirement age
Social security is a federal benefit that provides income to retired people. If you were born after 1960, you're not eligible for Social Security until age 67. Also keep in mind, some government pensions are reduced by the amount you receive from Social Security.
Other retirement savings options
Depending on your situation, you may want to invest for yourself in a retirement account like an IRA or Guaranteed Retirement Income from NationwideSM.