How many sources of income do you plan to have in retirement? If you’re like most Americans, you’ll have income from Social Security. You also may have retirement savings like an IRA or 401(k) that can generate income. What other sources will you have available? How many should you have?
According to a new study from the National Institute on Retirement Security (NIRS), the magic number is three. The study found that retirees who have a combination of three income sources - Social Security, personal savings, and a defined benefit pension - are least likely to be in poverty in retirement. Less than 10% of retirees with all three income sources were in poverty or near poverty.1
Poverty is more common among those retirees who have fewer than three sources of income. Among retirees who have only savings and Social Security, but no defined benefit pension, more than 20% are either in poverty or near poverty.1
Nearly 40% of retirees rely solely on Social Security for income. Among that group, more than half are either in poverty or near poverty.1
Of course, a defined benefit pension isn’t a common benefit these days. Only 16% of Fortune 500 companies offer one.2 It’s also possible that you haven’t saved as much as you would have liked by this stage of your career. If you’re lacking a defined benefit pension or personal savings, how do you replace those streams of income?
Use catch-up contributions to boost your savings.
Are you quickly approaching retirement and feel like you’re behind on your savings? The good news is there is still time to save money and create income for yourself in retirement. If you are age 50 or older, you can contribute up to $19,500 to your 401(k) in 2020, plus an additional $6,500 in catch-up contributions, for a total allowable contribution of $26,000.3
You can also contribute up to $6,000 to an IRA, plus an additional $1,000 in catch-up contributions if you’re 50 or older.3 Look for ways to trim your budget and increase your contributions ahead of retirement.
Change your plans.
Another option to boost your retirement income is to adjust your retirement plan. For example, by working a few years longer, you can give yourself more opportunity to save. You also may be able to delay your filing for Social Security, which could increase that source of income.
You could also work part-time in retirement. While that may not be ideal, part-time or seasonal work could provide a much-needed income stream to supplement Social Security or savings.
Guarantee your income.
You may not have access to a defined benefit pension, but that doesn’t mean you can’t have guaranteed* lifetime income. You can use financial vehicles like annuities to generate income that is guaranteed* for life, regardless of how long you live or how the financial markets perform. That stable income can act much like a pension.
Ready to plan your retirement income? Let’s talk about it. Contact us today at Florida Retirement Solutions. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. 20090 - 2020/5/18