7 Retirement Income Sources

Do you know where your retirement income is going to come from?
With interest rates remaining low, just to keep up with inflation, you’re going to need to manage your money and your income sources well. What follows are seven places where you might derive income in retirement, along with tips intended to get your “retirement mind” in shape for the future.

1) Retirement Savings Account

According to a March 13th, 2015, article in US News, almost 50 percent of working Americans say they intend to “rely heavily” on a retirement savings account to fund their post-work life. That would be ideal, were it not for the fact that the average 401(k) balance is only about $91,000. (For most retirees, that won’t even be enough to cover medical expenses.)

Retirement Savings Account Tip:

Use the catch-up contribution provision (if you are over 50), and don't mortgage your future by treating your 401(k) like a cash machine.


2) Social Security

Social Security is the most common retirement income source, with, according to the polling giant Gallup, some 56 percent of recipients relying on the program to cover most of their expenses. This is alarming because the program is likely due for substantial changes in the future. I’m not insinuating that Social Security will vanish entirely, but I often advise my younger clients to assume that the program (in terms of both benefit amounts and eligibility) will look radically different in the years to come.


Social SecurityTip:

If you're well off, you might consider applying for benefits as soon as you are eligible.


3) Well-Diversified Portfolio

While there is no magic savings number that ensures you’ll be flush throughout retirement, once you leave the workforce you need to make certain your investments are still generating income. A well-diversified portfolio could be the difference between barely getting by, or being able to buy that new car.


Well Diversified Portfolio Tip:

Many investment mistakes are not only emotionally driven, they are entirely preventable. Work with a fiduciary advisor to help you make dispassionate investment decisions.


4) Reverse Mortgage

Own your retirement when you own your home: We usually advise our clients to retire mortgage free. According to Gallup, however, almost 19 percent of retirees either use a reverse mortgage or sell their homes outright to fund their day-to-day retirement expenses.


Mortgage Retirement Tip:

Money not going out is the same as money coming in. If you retire and still have more than five years left on your mortgage, consider extending the mortgage out 10, 20 or even 30 years.


5) Pension

Unlike your father’s generation, private companies that offer pensions are becoming something of an endangered species. However, if you work for the government, you may still be golden.


Pension Tip:

Know both your pension’s “funding status” and “hurdle rate.”


6) Part-time Job

More and more of my clients seek to work part-time in retirement. The most popular reasons given are that they relish the stimulation, they like learning new things, and, of course, who doesn’t want a little extra money?


Part-Time Employment Tip:

Once you begin taking social security, you could experience a point-of-diminishing-returns bump into a higher tax bracket.


7) Inheritance

While inheriting money would be great, according to Gallup, only about 4 percent of Americans can entirely fund their retirements with money given to them by a relative.


Inheritance Tip:

According to a January 2016 article in The Daily News, 70% of people who inherit $1 million or more are bankrupt within seven years.


How are you going to fund your retirement? My experience has been that the people who have the most secure post-work lives often do so because they’ve achieved symmetry between their various income sources and professional, credentialed advice.

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